The relationship between the level of growth of an economic variable, gt, and its level, yt, is best approximated as
A) $g _ { t } = \frac { y t } { y t - 1 }$.
B) $y t = \log g t - \log g t - 1$.
C) $g t = \log y t - \log y t - 1$.
D) $\log g t = y t - y t - 1$.
E) $g t = \log y t + \log y t - 1$.

Question

The relationship between the level of growth of an economic variable, gt, and its level, yt, is best approximated as 
A) $g _ { t } = \frac { y t } { y t - 1 }$.
B) $y t = \log g t - \log g t - 1$.
C) $g t = \log y t - \log y t - 1$.
D) $\log g t = y t - y t - 1$.
E) $g t = \log y t + \log y t - 1$.

Quizplus · Accepted Answer

The most common relationship used to approximate the level of growth in an economic variable is the percentage change or the growth rate, which is calculated by taking the natural log of the current value of the variable and subtracting the natural log of the previous value. Therefore, option C, which is $g_t = \log y_t - \log y_{t-1}$, is the best choice. Options A, B, D, and E are not accurate representations of the relationship between the level of growth and the level of the economic variable.

The Relationship Between the Level of Growth of an Economic gt=ytyt−1g _ { t } = \frac { y t } { y t - 1 }gt​=yt−1yt​

The Relationship Between the Level of Growth of an Economic $g _ { t } = \frac { y t } { y t - 1 }$