Mini Homework 1 worth 1 2 of a homework grade econ 304 Name CINDY SUTANDAR Date 05 23 2015 last 4 PSU ID 4639 This mini HW assignment is worth 50 points 10 points each part 1 a Go to FRED and search for CPIAUCSL the Consumer Price Index for All Urban Consumers All Items Calculate the rate of inflation over the most previous 12 months Please show all work I help you by calculating the rate of inflation during the year 2000 YEAR 2000 01 01 2000 02 01 2000 03 01 2000 04 01 2000 05 01 2000 06 01 2000 07 01 2000 08 01 2000 09 01 2000 10 01 2000 11 01 2000 12 01 2001 01 01 169 300 170 000 171 000 170 900 171 200 172 200 172 700 172 700 173 600 173 900 174 200 174 600 175 600 Inflation is defined as the percent change in the price index over a twelve month period For the year 2000 the inflation rate is thus 175 6 169 3 169 3 100 3 72 Year Price index 2014 03 01 235 790 2014 04 01 236 240 2014 05 01 236 950 2014 06 01 237 348 2014 07 01 237 596 2014 08 01 237 409 2014 09 01 237 626 2014 10 01 237 753 2014 11 01 237 067 2014 12 01 236 284 2015 01 01 234 677 2015 02 01 235 186 2015 03 01 235 740 The rate of inflation over the most previous 12 months is 235 740235 790 235 790 100 0 0212 b Now go to FRED and search for PCEPI This is the price index that receives the most attention from the Federal Reserve in terms of fulfilling the nominal part of their dual mandate Calculate the most recent rate of inflation using PCEPI and compare to the Fed s implicit target of inflation 2 Is inflation too high too low or just right YEAR PRICE INDEX 2014 03 01 2014 04 01 2014 05 01 2014 06 01 2014 07 01 2014 08 01 2014 09 01 2014 10 01 2014 11 01 2014 12 01 2015 01 01 2015 02 01 2015 03 01 108 292 108 523 108 790 109 034 109 125 109 072 109 150 109 201 109 028 108 773 108 272 108 460 108 646 MOST recent rate 108 646 108 292 108 292 100 0 327 The most recent rate of inflation is 0 327 which is lower than the target of inflation of 2 2 Using FRED again search for GDPC96 and calculate the percent change in real GDP over the most recent 4 quarter period Again please show all work including the data that you used for your calculation Now compare to the potential growth rate as estimated by the Congressional Budget Office use GDPPOT Again show your calculations Is real GDP currently growing too slow or too fast relative to potential DATE 2014 01 01 2014 04 01 2014 07 01 2014 10 01 2015 01 01 REAL GDP 3 DECIMAL 15831 652 16010 405 16205 591 16294 699 16304 774 DATE Real Potential Gross Domestic Product 2014 01 01 2014 04 01 2014 07 01 2014 10 01 2015 01 01 16426 6 16489 7 16554 4 16621 0 16689 7 change in real GDP for 1st quarter 16010 405 15831 652 15831 652 100 1 129 change in real GDP for 2nd quarter 16205 59116010 405 16010 405 100 1 219 change in real GDP for 3rd quarter 16294 69916205 591 16205 591 100 0 550 change in real GDP for 4th quarter 16304 77416294 699 16294 699 100 0 062 change in potential rate for 1st quarter 16489 7 16426 6 16426 6 100 0 384 change in growth rate for 2nd quarter 16554 4 16489 7 16489 7 100 0 392 change in growth rate for 3rd quarter 16621 0 16554 4 16554 4 100 0 402 change in growth rate for 4th quarter 16689 7 16621 0 16621 0 100 0 413 The real GDP is growing too fast relative to potential rate 3 Using FRED search for UNRATE and compare the actual unemployment rate to the natural rate of unemployment as measured by NROUST Is the current unemployment rate higher or lower than the natural rate of unemployment Please use the actual numbers from FRED to answer this question UNRATE 2014 03 01 2014 04 01 2014 05 01 2014 06 01 2014 07 01 2014 08 01 2014 09 01 2014 10 01 2014 11 01 2014 12 01 2015 01 01 2015 02 01 2015 03 01 6 6 6 2 6 3 6 1 6 2 6 1 5 9 5 7 5 8 5 6 5 7 5 5 5 5 NROUST 2014 01 01 2014 04 01 2014 07 01 2014 10 01 2015 01 01 2015 04 01 5 72 5 61 5 51 5 40 5 39 5 38 The natural rate of employment is lower than the actual unemployment rate 4 During this lesson we talked about lags in policy Name the three lags in policy and then explain each lag in the context of fiscal policy and monetary policy The three lags in policy are 1 Recognition lag the time it takes to figure out that policy action is needed The fiscal policy and the monetary policy are the same 2 Implementation lag the time it takes for Congress to pass the laws needed to change taxes or spending For monetary policy it s very short for the FED to conduct open market operations If they want to buy or sell government securities to influence the money supply it does not take very long at all For fiscal policy it takes a long time for politicians to decide on gvt spending program or tax policy it might take 6 months or more to pass a tax policy 3 Effectiveness lag the time it takes from passing a tax or spending change to its effect on real GDP being felt Monetary policy is very short and fiscal policy is very long