Name Date last 4 PSU ID Economics 304WD Homework Lesson 1 Getting Familiar with the Macroeconomy 35 points 1 This homework will get your hands dirty with macroeconomic data from the Federal Reserve Economic Data FRED website hosted by the St Louis Federal Reserve Branch For example the rate of inflation during the year 2000 is as follows 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 In this case over a twelve month period For the year 2000 the inflation rate is thus CP I 2001 01 01 CP I 2000 01 01 x 100 CP I 2000 01 01 a 175 6 169 3 x 100 3 72 169 3 5 points Go to FRED and search for CPIAUCSL the Consumer Price Index for All Urban Consumers All Items Click download data or view data on the left hand side Calculate the rate of inflation over the most previous 12 months rounding to two decimal places Please show all work below CPI b 5 points 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 12 months using PCEPI to the nearest two decimal places and compare to the Fed s implicit target of inflation 2 Is inflation too high too low or just right circle your answer PCE Too high Too low Just right 2 Using FRED again search for GDPC96 a 5 points Calculate the percent change in real GDP over the most recent 4 quarter period rounding to two decimal places This is called the growth rate Again please show all work RGDP Now compare to the potential growth rate as estimated by the Congressional Budget Office use GDPPOT b 5 points Again show your calculations Is real GDP currently growing too slow too fast or just right relative to potential circle your answer Potential RGDP Too slow Too fast Just right 3 Using FRED search for UNRATE and compare the actual unemployment rate to the natural rate of unemployment as measured by NROUST a 5 points Is the current unemployment rate higher lower or just right than the natural rate of unemployment Please use the actual numbers from FRED to answer this question Current unemployment rate Natural rate of unemployment Higher Lower Just right 4 10 points What are the three biggies in terms of evaluating the US economy Briefly explain each and give information on how they have acted historically