This exercise will familiarize you with the U.S. economy. First a long-run look at the U.S.

GDP.

1. (33 points) Go to the U.S. Bureau of Economic Analysis web site (www.bea.gov).

Download the annual Gross Domestic Product data between 1929-2010.

(a) (8 points) Plot the data against time. Make sure your graph is perfectly labeled.

Include a copy of your graph in your printed assignment.

(b) (4 points) Prepare a table like the one below, ll it out, and include it in your

printed assignment.

1930s

1960s 1990s 2000s

Average Annual Growth

Rate of U.S. GDP (%)

1930s means from 1930 to 1939. To nd the average annual growth rate in the

1930s, you need to nd the annual growth rate for each year and then take the

average of the growth rates.

(c) (7 points) Apart from changes in productive capabilities of the U.S., what else

contributes to the growth rates you calculated? Name at least two things.

(d) (10 points) Go to the U.S. Bureau of Labor Statistics web site (www.bls.gov).

Download the annual not seasonally-adjusted data for CPI (all urban consumers,

U.S. city average, all items) between 1929-2010. Use the CPI values together with

the GDP values you downloaded from BEA to calculate the real U.S. GDP. Plot

the real GDP data you calculated against time. Make sure your graph is perfectly

labeled. Include a copy of your graph in your printed assignment.

1(e) (4 points) Prepare a table like the one above for real GDP, ll it out, and include

it in your printed assignment.

Now a short-term look at the U.S. economy.

2. (33 points) Using the BEA web site, get the quarterly Real GDP (chained 2005

dollars) data between 2005-2010. (Hint: Use Table 1.1.6.)

(a) (13 points) Plot the data against time. Make sure your graph is perfectly labeled.

Include a copy of your graph in your printed assignment.

(b) (15 points) Using the same table, get the data for Consumption Spending, In-

vestment Spending, and Government Spending. On your spreadsheet application,

calculate the quarterly growth rates of real GDP, real C, real I, and real G. Plot

these growth rates against time on a single graph. Include a copy of your graph

in your printed assignment.

(c) (5 points) Which component of real GDP has drastically changed during the

2009 recession?

3. (13 points) Go to the BLS web site and download unemployment rate data for each

month between 2005-2010. You will calculate the average quarterly data from the

monthly data. For example, for the rst quarter of 2005, add the unemployment rates

in January, February, and March, and divide the sum buy 3. This is going to be the

unemployment rate for the rst quarter of 2005.

(a) (9 points) Plot the quarterly unemployment rate against time. Make sure your

graph is perfectly labeled. Include a copy of your graph in your printed assign-

ment.

(b) (4 points) Look at the unemployment rate graph and the quarterly real GDP

graph from previous question. How do you think they are related? Why are they

related like that? Use the arguments we made in class to explain the relationship.

4. (16 points) Go to the BLS web site. Download the annual not seasonally-adjusted

data for PPI (use commodity data NOT industry data, all commodities) between 1929-

2010.

(a) (10 points) On the same graph, plot the annual CPI and PPI values. Include a

copy of your graph in your printed assignment.

Notice that until about 1985, the two series follow one another rather closely.

However, after 1985 they are quite di erent in value.

(b) (3 points) If you were to calculate the in

ation rate between 1985-2001, which

series would give you a higher in

ation rate? Explain.

(c) (3 points) If you were to calculate the in

ation rate between 2001-2008, which

series would give you a higher in

ation rate? Explain.