2. (30 points - 10 points each part) In this problem, we are going to obtain dat

Question

2. (30 points - 10 points each part) In this problem, we are going to obtain data on consumption and disposable income from the Federal Reserve.  

      Go to FRED (Federal Reserve Economic Data) and search for PCECC96 (real personal consumption expenditures - this is consumption).  Click on View Data at the left side of the chart.  This will take you to a list of the numerical data.

      Record the level of consumption the quarter that you were born as well recording the most recent data on consumption.  

      Search FRED again for DPIC96 (real disposable personal income - this is disposable income (Yd)).  Again, click on View Data.

      Record the level of disposable income the quarter you were born as well as the most recent data on disposable income. Please answer the following questions.

a) What is the percent change in consumption since you were born?   What is the percent change in real disposable income since you were born? Please show all work.

b) Draw a graph, much like you did on question #1, with disposable income (Yd) on the horizontal axis and consumption on the vertical axis, plotting as point A the disposable income / consumption combination when you were born and plotting as point B, the most recent disposable income / consumption combination.

c) Would it be correct to connect points A and B with a ruler and call it a consumption function?  Why or Why not (don't actually do it)?

3)  (5 points) Solve the following equation for Y

Y = 330 + .8 Y

Explanation / Answer

Y=330+0.8Y

or Y= 330/0.2

or Y= 1650

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