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letter of transmittalCouncil of Economic AdvisersWashington, D.C., February 11, 2010Mr. President:The Council of Economic Advisers herewith submits its 2010Annual Report in accordance of the Employment Act of 1946 as amendedby the Full Employment and Balanced Growth Act of 1978.Sincerely,Christina D. RomerChairAustan GoolsbeeMemberCecilia Elena RouseMember13
C O N T E N T SPageCHAPTER 1. TO RESCUE, REBALANCE, AND REBUILD ......... 25Rescuing an Economy in Freefall ............................................ 26Rescuing the Economy from the Great Recession ........................ 28Crisis and Recovery in the World Economy ................................ 29Rebalancing the Economy on the Path to FullEmployment ...................................................................................... 29Saving and Investment .................................................................. 29Addressing the Long-Run Fiscal Challenge ................................. 31Building a Safer Financial System ............................................... 32Rebuilding a Stronger Economy .............................................. 33Reforming Health Care ................................................................. 33Strengthening the American Labor Force .................................... 35Transforming the Energy Sector and Addressing ClimateChange ............................................................................................ 36Fostering Productivity Growth Through Innovation andTrade .............................................................................................. 37Conclusion ........................................................................................ 38CHAPTER 2. RESCUING THE ECONOMY FROM THEGREAT RECESSION ................................................................................ 39An Economy in Freefall ............................................................... 39The Run-Up to the Recession ........................................................ 40The Downturn ............................................................................... 41Wall Street and Main Street ......................................................... 44The Unprecedented Policy Response ...................................... 46Monetary Policy ............................................................................. 47Financial Rescue ............................................................................ 49Fiscal Stimulus ............................................................................... 51Housing Policy ............................................................................... 55The Effects of the Policies ........................................................ 5615
Page 1 and 2: e c o n o m i cr e p o r to f t h e
Page 4 and 5: C O N T E N T SECONOMIC REPORT OF T
Page 6 and 7: economic report of the presidentTo
Page 8 and 9: Because of these and other steps, w
Page 11 and 12: usinesses and farmers. And by harne
Page 13: the annual reportof thecouncil of e
Page 17 and 18: Commercial Real Estate ............
Page 19 and 20: CHAPTER 8. STRENGTHENING THE AMERIC
Page 21 and 22: list of figures1-1. House Prices Ad
Page 23 and 24: 7-3. Child and Infant Mortality Acr
Page 25 and 26: C H A P T E R 1TO RESCUE, REBALANCE
Page 27 and 28: Figure 1-1House Prices Adjusted for
Page 29 and 30: emain in achieving a full recovery.
Page 31 and 32: esult of this rebalancing will be a
Page 33 and 34: Rebuilding a Stronger EconomyEven b
Page 35 and 36: Chapter 7 describes the actions the
Page 37 and 38: slowing the emission of greenhouse
Page 39 and 40: C H A P T E R 2RESCUING THE ECONOMY
Page 41 and 42: The DownturnHouse prices began to d
Page 43 and 44: Figure 2-3TED Spread and Moody’s
Page 45 and 46: The basic reason for these policies
Page 47 and 48: Monetary PolicyThe first line of de
Page 49 and 50: The flip side of the large increase
Page 51 and 52: There were two other key components
Page 53 and 54: would be spent by the end of the th
Page 55 and 56: In November, the Worker, Homeowners
Page 57 and 58: stimulus. And both direct estimates
Page 59 and 60: the mortgage market. Another market
Page 61 and 62: composition of mortgage finance. In
Page 63 and 64: 105Figure 2-9FHFA and LoanPerforman
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Figure 2-11Real GDP: Actual and Sta
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market policies were surely importa
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One can again use the VAR described
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Initial unemployment insurance clai
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Table 2-2Forecast and Actual Macroe
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appears to have contracted somewhat
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Box 2-1, continuedThe normal or pot
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The Administration has also support
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C H A P T E R 3CRISIS AND RECOVERYI
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Figure 3-1Interbank Market RatesPer
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avoid risky investments at the heig
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The Collapse of World TradeDespite
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strongly correlated with the extent
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strong and swift in most countries
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to be 5.5 percent over 2009 and is
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sheet on a similar scale. 5 While i
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were fully collateralized with fore
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appear to have adopted less discret
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The second G-20 leaders’ summit t
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downward through the winter and spr
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Figure 3-13Outperforming Expectatio
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losses in the level of output in th
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asset prices in those economies. Th
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former levels but rather that they
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This chapter lays out a picture of
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Indeed, some of the factors should
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Percent, seasonally adjusted14Figur
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saving rate will eventually stabili
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Figure 4-6Homeownership RatePercent
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new investment in this sector. Firs
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mortgage-backed securities (CMBS),
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Percent, seasonally adjusted6.5Figu
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and unemployment was low. In a boom
Page 131 and 132:
The Current Account in the Recovery
Page 133 and 134:
Figure 4-11Growth of U.S. Exports a
Page 135 and 136:
C H A P T E R 5ADDRESSING THE LONG-
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The key message of the figure, howe
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Figure 5-3Budgetary Cost of Previou
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substantial assets in preparation.
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The Effects of Budget DeficitsTwo f
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grows. Thus, the key to a sustainab
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2 percent per year, nominal GDP gro
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ate of roughly 6 percent during the
Page 151 and 152:
Figure 5-7Top Statutory Tax RatesPe
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with different incomes—the differ
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The Administration understands that
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a strategic plan. Throughout this p
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will decide to use the money for so
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Figure 6-3Share of Financial Sector
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These private mortgage pools issue
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or the failure of a major bank. The
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taking a macroprudential approach,
Page 169 and 170:
Classic bank runs were commonplace
Page 171 and 172:
Figure 6-6Coordination ContagionNEG
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economy if they failed. No regulato
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justifiable. In particular, the gro
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thrifts eventually followed suit, w
Page 179 and 180:
The Current State of theU.S. Health
Page 181 and 182:
with the growth eventually turning
Page 183 and 184:
common sense suggest that purchasin
Page 185 and 186:
When individuals are healthy, their
Page 187 and 188:
compared with an average of 80.7 in
Page 189 and 190:
Figure 7-4Insurance Rates of Non-El
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prohibitively high for them. Furthe
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Small Businesses. As described earl
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in private health insurance coverag
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Enrollment (millions)5251Figure 7-9
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legislation lays the groundwork for
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obtain and provide insurance, and w
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Senate bills, subsidies would be av
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Both bills also include measures th
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price competitively. And to the ext
Page 209 and 210:
C H A P T E R 8STRENGTHENING THEAME
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ut have given up looking for work a
Page 213 and 214:
years, backed by a union that barga
Page 215 and 216:
Figure 8-4Share of Pre-Tax Income G
Page 217 and 218:
Reform of the immigration system ca
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widespread expansion of state colle
Page 221 and 222:
Box 8-1, continuedfunding is being
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Mean scale score out of 50032017-ye
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many aid-eligible students from eve
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Box 8-2, continued(GED) preparation
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Providing incentives for schools id
Page 231 and 232:
C H A P T E R 9TRANSFORMING THE ENE
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to atmospheric concentrations. And
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typhoons is likely to grow, as are
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Box 9-1, continuedAlthough warmer t
Page 239 and 240:
Jump-Starting the Transition to Cle
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keep it from entering the atmospher
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Other Domestic Actions toMitigate C
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emission allowances. These allowanc
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prices above certain thresholds tri
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Box 9-3, continuedfirms subject to
Page 251 and 252:
International Action on Climate Cha
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analysis under clearly defined guid
Page 255 and 256:
C H A P T E R 1 0FOSTERING PRODUCTI
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For too many years, our Nation has
Page 259 and 260:
A more subtle message is that the a
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workers and capital are likely to b
Page 263 and 264:
Box 10-1, continuedThe second is a
Page 265 and 266:
Private Research and Experimentatio
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system of patents and copyrights th
Page 269 and 270:
in governmental policymaking proces
Page 271 and 272:
While the act of specializing shoul
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currently exports on net and instea
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use less advanced technology and pr
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Administration has continued pressi
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who do not benefit from these advan
Page 281 and 282:
REFERENCESChapter 1To Rescue, Rebal
Page 283 and 284:
Sahm, Claudia R., Matthew D. Shapir
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Benartzi, Shlomo, and Richard Thale
Page 287 and 288:
————. 2009g. A Preliminary
Page 289 and 290:
————. 2009b. Letter to the
Page 291 and 292:
Sisko, Andrea, et al. 2009. “Heal
Page 293 and 294:
Hair, Elizabeth, et al. 2006. “Ch
Page 295 and 296:
Rouse, Cecilia, et al. 2007. “Fee
Page 297 and 298:
Intergovernmental Panel on Climate
Page 299 and 300:
————. 2002. “Sources of U
Page 302 and 303:
letter of transmittalCouncil of Eco
Page 304:
Council Members and Their Dates of
Page 307 and 308:
The Members of the CouncilThe other
Page 309 and 310:
Many of the reports issued by the C
Page 311 and 312:
Christopher D. Carroll ............
Page 313 and 314:
Benjamin N. Dennis (Department of t
Page 315 and 316:
C O N T E N T SNATIONAL INCOME OR E
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PRODUCTION AND BUSINESS ACTIVITYB-5
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AGRICULTURE—ContinuedB-101. Agric
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National Income or ExpenditureTable
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Table B-2. Real gross domestic prod
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Table B-3. Quantity and price index
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Table B-5. Contributions to percent
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Table B-6. Chain-type quantity inde
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Table B-7. Chain-type price indexes
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Table B-8. Gross domestic product b
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Table B-10. Gross value added by se
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Table B-12. Gross domestic product
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Table B-13. Real gross domestic pro
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Table B-14. Gross value added of no
Page 343 and 344:
Table B-16. Personal consumption ex
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Table B-18. Private fixed investmen
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Table B-20. Government consumption
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QuarterTable B-22. Private inventor
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Table B-24. Foreign transactions in
Page 353 and 354:
Table B-26. Relation of gross domes
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Table B-28. National income by type
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Year or quarterPersonalincomeTable
Page 359 and 360:
Table B-30. Disposition of personal
Page 361 and 362:
Table B-32. Gross saving and invest
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Table B-33. Median money income (in
Page 365 and 366:
Table B-35. Civilian population and
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Table B-36. Civilian employment and
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Table B-38. Unemployment by demogra
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Table B-40. Civilian labor force pa
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Table B-42. Civilian unemployment r
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Table B-44. Unemployment by duratio
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Table B-46. Employees on nonagricul
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Table B-47. Hours and earnings in p
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Table B-49. Productivity and relate
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Production and Business ActivityTab
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Table B-53. Industrial production i
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Table B-55. New construction activi
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Table B-57. Manufacturing and trade
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Table B-59. Manufacturers’ new an
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Table B-61. Consumer price indexes
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Table B-62. Consumer price indexes
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Table B-64. Changes in consumer pri
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Table B-65. Producer price indexes
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Table B-67. Producer price indexes
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Year ormonthTable B-68. Changes in
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Table B-70. Components of money sto
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Table B-71. Aggregate reserves of d
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Table B-73. Bond yields and interes
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Table B-74. Credit market borrowing
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Table B-75. Mortgage debt outstandi
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Table B-77. Consumer credit outstan
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Table B-79. Federal receipts, outla
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Table B-81. Federal receipts, outla
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Table B-83. Federal and State and l
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Table B-85. State and local governm
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Table B-87. U.S. Treasury securitie
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Table B-89. Estimated ownership of
Page 429 and 430:
Table B-91. Corporate profits by in
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Table B-93. Sales, profits, and sto
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Table B-95. Historical stock prices
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YearTotal 1AgricultureTable B-97. F
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Table B-99. Farm output and product
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Table B-101. Agricultural price ind
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Year or quarterExportsInternational
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Table B-104. U.S. international tra
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Table B-106. U.S. international tra
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Table B-108. Industrial production
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Period456 | Appendix BTable B-110.
Page 451:
Table B-112. Growth rates in real g
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