Go to the St. Louis Federal Reserve FRED database, and find data on the most recent values for Personal Income (PINCOME), Disposable Personal Income (DPI), and Personal Consumption Expenditures (PCEC).

a) For the most recent quarter available, compute the difference between personal income and disposable personal income. What does the value of the difference between personal income and disposable personal income represent?

b) Find personal consumption and disposable income, and calculate the average of both of these over the last four quarters of data available, and over the four quarters prior to that. Calculate the changes in personal consumption and disposable income over the two periods, and the ratio of the changes. What is this ratio? Given the fact that disposable income increases dollar-for-dollar with a tax reduction, what can you conclude about the effect of a tax cut on spending by households?