WORKING WITH MACROECONOMIC DATA
For data to use in these exercises, go to the Federal Reserve Bank of St. Louis FRED database at fred.stlouisfed.org.
1. An economic variable is persistent if declines in the variable tend to be followed by more declines, and increases by more increases.
This question asks you to study the persistence of the civilian unemployment rate.Using data since 1961, identify all quarters in which the unemployment rate changed by at least 0.2 percentage points from the previous quarter (either up or down). How many of these changes by 0.2 percentage points or more were followed in the subsequent quarter by (1) another change in the same direction, (2) a change in the opposite direction, or (3) no change? Based on your count, would you say that the unemployment rate is a persistent variable?
2. How does each of the following variables behave over the business cycle? Develop graphs to show your results and give economic explanations.
a. Real imports
b. Federal government receipts
c. Housing starts
d. Capacity utilization rate, manufacturing
e. Average weekly hours, manufacturing
3. It has been argued that the stock market predicts recessions. Using quarterly data since 1961, plot the real value of the stock market index (the Wilshire 5000 index in the last month of the quarter divided by the GDP deflator). Do you find the stock market to be a good economic forecaster?
4. Graph the levels of real GDP for the United States, Canada, and Germany (data can be found at www.oecd.org under Statistics and then under National Accounts). Are U.S. and Canadian business cycles closely related? U.S. and German business cycles?
5. In the FRED database, find a variable that is available in both a seasonally adjusted form and a not seasonally adjusted form. Plot both over time and describe how large the seasonal variation in the variable is.
Learning Objectives
9.1 Discuss factors that affect the fullemployment (FE) line.
9.2 Discuss factors that affect the IS curve, which represents equilibrium in the goods market.
9.3 Discuss factors that affect the LM curve, which represents equilibrium in the asset market.
9.4 Describe the conditions necessary for general equilibrium using the IS-LM model.
9.5 Discuss the role of price adjustment in achieving general equilibrium.
9.6 Explain the fundamentals and implications of the AD AS model.