Problem 6 (30 points)

Go to the FRED website, https://fred.stlouisfed.org/, and find data on: (i) quarterly gross private domestic investment expenditures, (ii) quarterly GDP, (iii) three-month Trea- sury bill rate, (iv) quarterly inflation rate for all urban consumers (percentage change from a year ago) for the U.S.

(a) (5 points) Calculate the quarterly ratio of investment expenditures to GDP for the period Q1:1960Q4:2021.*

(b) (5 points) Calculate the real interest rate as a three-month Treasury bill rate minus the quarterly inflation rate for the period Q1:1960Q4:2021.*

(c) (10 points) Plot both variables from (a) and (b) in one graph.

(c) (10 points) Does this graph go in line with the prediction of our model that interest rate and investment have a negative relationship? Why might this not be the case? Explain.

*Please, attach an appendix to the end of your homework and include the variables con- structed for parts (a) and (b) as a table.