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For this question you need to access data from the Federal Reserve Bank of St. Louis FRED economic database (https://fred.stlouisfed. Look for…

For this question you need to access data from the Federal Reserve Bank of St. Louis FRED economic database ( Look for quarterly data for USA for the 2003-2017 period.

1A) Plot, in the same graph, the evolution of real GDP (Y ) and nominal GDP ($Y ). Explain why these time series are different.

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1B) Plot the evolution of each component of real GDP: C (“Real Personal Consumption Expenditures”), G (“Real government consumption expenditures and gross investment”), I (“Real Gross Private Domestic Investment”) and NX (“Real Net Exports of Goods and Services”). Classify each of these components as pro-cyclical, counter-cyclical or a-cyclical. Briefly describe the business cycle in USA, focusing on the 2008-2009 crisis

1C) Construct a bar-chart for the ratio of each component to GDP for the year 2010: C/Y , G/Y , I/Y and NX/Y (hint: although not identical because of different sources, your results should be consistent with column 2 of table 3-1 in Chapter 3). Rank these components in terms of size.

1D) Plot the time series for the ratio of each component to GDP from part (c). Provide a brief comment on the evolution of the size of each of these components.

1E) Construct a scatter-plot with Real Personal Consumption Expenditures on the vertical axis and Real GDP on the horizontal axis. Fit a linear trend. Does the data support the existence of an aggregate consumption function?

2) (20 points) Is the goods market model introduced in Chapter 3 consistent with the data you presented in Question 1? Explain using graphs, intuition and algebra. If you need to add additional data, feel free to do so (hint: don’t discuss whether the assumptions of the model hold in reality (they don’t). Focus on whether the relationship between variables implied by the model seems consistent with the data). 


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