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Please, based on your previous readings on Chapter 17 (Investment), answer the following questions: Investment in physical capital (a FRED question): Create a graph of
Please, based on your previous readings on Chapter 17 (Investment), answer the following questions: Investment in physical capital (a FRED question): Create a graph of the investment rate in physical capital, such as we might use in studying the Solow growth model. In doing this, you will learn to appreciate some of the subtleties in the National Income and Product Accounts. Follow the steps below: (i) Access the FRED data series for gross private domestic investment (GPDI). (ii) Use the "Add Data Series" 4 times (with the "Modify Existing Series" option selected) to add the following 4 series: Y001RC1Q027SBEA, A782RC1Q027SBEA, Y055RC1Q027SBEA, and GDP. If you have done this correctly, you should now have 5 series labeled "a," "b," "c," "d," and "e." (iii) Select "Create Your Own Data Transformation" and enter the following formula: (a - b + c - d) /e. Then click "Apply" to create your graph. Complete the following exercises: (a) Display the graph. (1 point) (b) Explain what is being added and subtracted to create this series, and why. (2 points) (c) Comment briefly on the time series for the investment rate in physical capital that you have calculated (1 point)
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