Go to the St. Louis Federal Reserve FRED database, and find data on real government spending (GCEC1), real GDP (GDPC1), taxes (W006RC-1Q027SBEA), and the personal consumption expenditure price index (PCECTPI), a measure of the price level. Download all of the data into a spreadsheet, and convert the tax data series into real taxes. To do this, for each quarter, divide taxes by the price index and then multiply by 100.
a. Calculate the level change in real GDP over the four most recent quarters of data available, and the four quarters prior to that.
b. Calculate the level change in real government spending and real taxes over the four most recent quarters of data available, and the four quarters prior to that.
c. Are your results consistent with what you would expect? How do your answers to part (b) help explain, if at all, your answer to part (a)? Explain using the IS and AD curves.