1.In the table below we see the components of GDP (in percent of GDP) for Germany.

ConsumptionInvestmentGovernmentExportsImports

Spending

???22.8722.5346.8941.10

Source: theglobaleconomy.com

(a)Calculate the percent of GDP in Germany due to consumption.

(b)If you average consumption in the United States over the past 5 years (cf. slide 14 of lecture 2) "by eye,"¹ is consumption higher or lower in Germany? Briefly explain.

2.In this exercise your goal is to calculate an inflation rate shown in the third lecture.

Download the quarterly Consumer Price Index for All Urban Consumers: All Items in U.S. City Average data from the FRED website.

Calculate the annual inflation rate time series from this data as the year-over-year percentage change in the price index. For example:

(1) Consumption: Personal Consumption Expenditure Y = C+/+ G+ NX 75 70 65 PCE (% of GDP) 60 55 50 45 40 50 60 70 80 90 00 10 20 Source: FRED / BEA TIME (years) Lecture 2 - Measurement I - GDP: R. J. Hawkins Econ 100B: Macroeconomics 14/ 28Measuring Economic Activity: Inflation Various measures of the inflation rate: 15 GDP PCE CPI 10 Inflation Rate (%) 5 0 -5 40 50 60 70 80 90 00 10 20 Source: FRED / BEA & BLS TIME (year) Lecture 3 - Measurement II - x, U, & r: R. J. Hawkins Econ 100B: Macroeconomics 9/ 22Measuring Economic Activity: Interest Rates Nominal and real interest rates & inflation: Consider 1 item that costs one U.S. dollar USD today. I could buy it today, but if I wait a year: . My dollar can grow to USD 1.00 x (1 | 2) in a bank account, where i is the nominal interest rate. . The number of items (quantity) I expect to have in the future is dollars in account USD 1.00 x (1 + 2) dollars per item USD 1.00 x (1 | TE) = (1 + r) items item where 7 is expected inflation and r is the real interest rate. . If we neglect in and terms involving (7")" for n > 2 we get the Fisher equation: T = Lecture 3 - Measurement II - x. 1. & . J. Hawkins Econ 1008: Macroeconomics 19/ 22