**Econ 1200 – Extra Credit Assignment (15 points)**

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**Instructions (please read carefully):**

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1. This assignment is **optional**. It may be completed either as a team of two members (recommended), or individually.

2. You are responsible for forming your own teams. The assignment files should be submitted on Blackboard **once per team** and they **must have the names of both team members**.

3. You will **need Microsoft Excel** and access to Internet to complete this assignment.

4. All required results (graphs, interpretations, etc) should be included in a Word document. An Excel workbook must accompany the Word file to show, if necessary, how you found the results that you are reporting.

5. To receive credit, the assignment files must be turned in **no later than Thursday, April 14 ^{th}, by midnight**. (this is the week after Exam 2).

**6. **__Collaboration outside your own team is not allowed. If I find evidence to the contrary, all the students involved will receive zero credit for this assignment. __

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**General guidelines for graphs: **Graphs are an important part of this assignment, so please make sure they convey meaningful information. Include a title, a legend, and label the axes. Specify the units you are using (for example: dollars vs. billion dollars vs. dollars per person, or months vs. quarters vs. years, etc). This will also help you make sure that you are in fact plotting variables measured in the same units.

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**Econ 1200 – Extra Credit Assignment (15 points)**

Unless specified otherwise, download all your data from the St. Louis Fed data base (FRED) which can be found at:

https://research.stlouisfed.org/fred2/

**1. ****Nominal GDP vs. Real GDP in the U.S.**

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Data Series:

*1. **Gross Domestic Product*** [GDP]**

*2. **Gross Domestic Product: Implicit Price Deflator [GDPDEF]*

**Frequency: Quarterly (Q)**

**Time Period: Quarter 1:1947 to Quarter 4:2015**

Deliverables:

1. Plot on the same chart GDP and Real GDP calculated using the GDP Implicit Price Deflator Data

2. Based on what you see in the chart which, do you think, is the base period for your Real GDP calculations? Why?

3. How do prices before the base period compare to the base period? What about after the base period? Explain.

4. Calculate, using the formula from the slides, the growth rate of Real GDP from quarter to quarter (starting from Quarter 2: 1947). Report the *quarterly* average growth rate of RGDP (as a percentage). What is the *annual* growth rate of Real GDP?

Hint: You can approximate the *annual* growth rate of Real GDP by multiplying the *quarterly* rate by 4.

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**2. GDP – U.S. vs. China **

__US data series: __

*1. **Gross Domestic Product*** [GDP]**

*2. **GDP Implicit Price Deflator in United States©*** [USAGDPDEFAISMEI]**

*3. **Total Population: All Ages including Armed Forces Overseas*** [POP]**

**Frequency: Annual (A) (Aggregation Method: Average)**

**Time Period: 1979 to 2014.**

__China data series:__

Go to Blackboard => Content => Extra_credit_assignment=> Data_Extracted_From_World_Development_Indicators_China.xlsx

*1. **Population, total [SP.POP.TOTL]*

*2. **GDP at market prices (current US$)[ NY.GDP.MKTP.CD]*

**Hint: **Pay attention to the measurement units used for each country.

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Deliverables:

1. Plot in the same chart US Real GDP and China Real GDP over the entire sample period.

2. Now plot in another chart, US Real GDP per capita together with China Real GDP per capita over the same sample period as above.

3. Calculate (as a percentage) and plot in the same chart, the ratio of China Real GDP to US Real GDP, as well as China Real GDP per capita to the US Real GDP per capita in 1980, 1990, 2000, 2010 and 2014. What do you observe?

4. Calculate and report the average annual growth rate for US Real GDP per capita and China Real GDP per capita over the entire sample period.

5. Now assume that starting from 2014 until 2050, each country will grow from year to year at the average growth rate calculated above. Plot on the same chart, from 1979 to 2050, China Real GDP per capita and the US Real GDP per capita. Based on this graph when do you estimate that China will catch up to the US (in per capita terms)?

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**3. ****Inflation and Unemployment in the U.S.**

Data series:

*1. **Civilian Unemployment Rate [UNRATE] (Seasonally adjusted)*

*2. **Real Gross Domestic Product [GDPC1] (Seasonally adjusted)*

**3. ***GDP Implicit Price Deflator in United States©*** [USAGDPDEFAISMEI]**

*4. **Consumer Price Index for All Urban Consumers: All Items [CPIAUCSL](Seasonally adjusted)*

*5. **Personal Consumption Expenditures Excluding Food and Energy (Chain-Type Price Index) [PCEPILFE]*

**Frequency: Quarterly (Q) (Aggregation Method: Average)**

**Time Period: Quarter 1: 1959 to Quarter 4: 2015.**

Deliverables:

1. Plot the civilian unemployment rate together with the percentage change in Real Gross Domestic Product for the time period Quarter 2: 1959 to Quarter 4: 2015. Based on the graph, what is the response of the unemployment rate when the economic growth rate drops sharply and turns negative? Does this change in the unemployment rate (relative to GDP) appear to be coincident (simultaneous), leading (preceding), or lagging (following)?

2. Calculate and report the average unemployment rate for the entire sample period. When was the lowest unemployment recorded? Report the top 5 periods with the highest unemployment rates. [Hint: The “Sort” option in the Data menu should be very useful. Make sure to select first the data to which you want to apply it, otherwise the entire work sheet will be affected.]

3. Plot on the same chart, for the entire data sample, the inflation rate calculated using each of the 3 price indexes from above: GDP Implicit Deflator, CPI, and PCE Index (excluding food and energy). What measure of inflation appears to fluctuate more from one period to another (i.e. the graph looks more choppy with higher variations)?

4. Report the average *annual* inflation based on each price index. Any differences? Assuming that you are in the process of renegotiating your wage with an employer, which measure of inflation (and price index) would you prefer? Explain.

Subject | Business |

Due By (Pacific Time) | 04/14/2016 08:17 am |

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