Name ___________Tedjo Imardjoko______________________

Date____01/24/2020_____ last 4 PSU ID ____8841___

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:

2000-01-01 169.300
2000-02-01 170.000
2000-03-01 171.000
2000-04-01 170.900
2000-05-01 171.200
2000-06-01 172.200
2000-07-01 172.700
2000-08-01 172.700
2000-09-01 173.600
2000-10-01 173.900
2000-11-01 174.200
2000-12-01 174.600
2001-01-01 175.600

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:

!"#!""#$"#$"# $!"#!"""$"#$"# %&'.)$%)*.+

𝑥100 = 𝑥100 = 3.72%
!"#!"""$"#$"# %)*.+

a) (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:

!"#!"!"$#!$"# $!"#!"#&$#!$"# ,)%.&-$,'-...

𝑥100 = 𝑥100 = 1.29%
!"#!"#&$#!$"# ,'-...

πCPI = 1.29
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)?

!"#!"!"$##$"# $!"#!"#&$##$"# %%%.&/$%%/..)

𝑥100 = 𝑥100 = 1.12%
!"#!"#&$##$"# %%/..)

πPCE = 1.12

Too high Too low Just right

2. Using FRED again, search for GDPC1.

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.

0+ ,/,/$0+ ,/%* %-,'*).',%$%*,%.%.&..

𝑥100 = 𝑥100 = −2.85%
0+ ,/%* %*,%.%.&..

%∆RGDP = -2.85
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)?

0+ ,/,/$0+ ,/%* %*,,)&.&,///$%-,*.+.%.///

𝑥100 = 𝑥100 = 1.71%
0+ ,/%* %-,*.+.%.///

%∆Potential RGDP = 1.71

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 = 6.7

Natural rate of unemployment = 4.4

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.

The ‘the three biggies’ in terms of evaluating the US economy are full employment,
potential growth rate and stable prices.

Full employment means that all available labor is being used efficiently. Full employment
cannot be zero. Around 3 percent unemployment is considered full employment.
According to data from FRED, in August 2018 until February 2020, the US economy is
close to full employment with unemployment rate consistently below 4.0% before the
unemployment rate increased significantly due to the pandemic.

Potential growth is growth that an economy can encounter without too much inflation.
This phenomenon usually occurs when the economy is doing well and away from
recession or shocks that can hit the economy.

Stable prices means there is very little changes or no changes to price. It means there are
lack of inflation or deflation to price.