ECON 304 FTU SPRING 2024
FRED Group Activity – Components of GDP | DUE: Tuesday, April 23, in-class.
Submission Version: Word, VOPP, VIDEO, Any medium you are comfortable with is fine. Be creative!
Maybe you could make a TV interview where you (your team) are the economic expert(s) invited on
CNBC or Bloomberg, and these questions were posed to you. How would you answer them? Remember,
you must be thorough and clear in your answers.
Analysis I
In this FRED activity we will analyze the components of GDP.
As discussed in class, there are 4 components of GDP on the expenditure side: Consumption (C) +
Investment (I) + Government Expenditures (G) + Net Exports (NX)
Remember Y = C + I + G + NX
Where, NX = Exports - Imports
By the end of this assignment you will have a graph that looks similar to mine but through 2024
1. Using the FRED, graph the following on the same chart:
a. Real Personal Consumption Expenditures
i. Under “Real personal consumption expenditures,” select “Billions of Chained
2017 Dollars, Quarterly, Seasonally Adjusted Annual Rate.” Notice that this
series, which measures goods and services purchased by U.S. residents, is
reported in “Billions of chained 2017 dollars.
• Hint: You can simply just search the follow code for the exact dataset:
PCECC96
ii.
b. Real government consumption expenditures and gross investment quarterly seasonally
adjusted Total Expenditures
i. Add Data Series. In the search bar, type “real government consumption
expenditures and gross investment quarterly seasonally adjusted.” Two data
series names will appear, make sure select: GCEC1
• Note: Government consumption expenditures and gross investment
measures the portion of gross domestic product (GDP), or final
expenditures, that is accounted for by the government sector.
Government consumption expenditures consists of spending by
government to produce and provide services to the public, such as public
school education. Gross investment consists of spending by government
for fixed assets that directly benefit the public, such as highway
construction, or that assist government agencies in their production
activities, such as purchases of military hardware.
c. Real Gross Private Domestic Investment
i. Add Data Series. In the search bar, type “real gross private domestic investment
quarterly seasonally adjusted. make sure select : GPDIC1
d. Real Exports of Goods and Services
i. Add Data Series. In the search bar, type real exports of goods and services
seasonally adjusted. Make sure select: EXPGSC1
2. Transforming the Data
a. FRED® allows you to use a formula to modify and combine two or more data series into a
single line. Under Edit Lines, select “Real Exports of Goods and Services”
b. VERY IMPORTANT STEP!
i. In the customize data search bar: type “real imports of goods and services.”
Make sure select: IMPGSC1
ii. Click Add
iii. This should have assigned “Real imports of goods and services” as variable (b) as
shown below.
c. To calculate net exports, “Create your own data transformation: [+].” In the “Formula”
bar that appears, type “a-b.” This formula tells FRED® to subtract the “b” series (real
imports, IMPGSC1) from the “a” series (real exports, EXPGSC1) to create a new data line
(which will replace the current Data Series 4 line).
3. Stacking the Data
i. To change from a line graph to an area graph, under the “Format” tab, click
“Graph Type” and select “Area.” Your graph changes to an area graph.
ii. You have now graphed all of the individual components of U.S. real GDP, but they
have not yet been combined into a total value. Does FRED® have the capability to
perform this function? Of course! First, notice the values on the y-axis. With the
next action, these values will change to accommodate the total value of all of the
components.
• Go to the “Stacking” drop-down menu (below “Graph type”) and select
“Normal.” Your graph changes to create the total value. Notice the
increase in the y-axis values. You have now created a graph showing total
real GDP and the values of each of its subparts: consumer spending,
government spending, private sector spending, and spending outside the
United States on U.S. goods (exports).
Questions:
1) Which component makes up the largest share of U.S. GDP?
2) How does the Personal Consumption Expenditures in Q2 of 2020 compare to Q4 of 2019? Why
do you think it changed?
3) Copy and paste your graph and provide the unique link to your graph that FRED provides as well.
You can access this link by clicking “Share Links” tab below the graph you created on FRED.
Analysis II
➢ Step 1: Go to the FRED website (https://fred.stlouisfed.org/) and type “Contributions to
percentage change in real gross domestic product: Personal consumption expenditures” in the
search box. Click at that series, and you’ll see a graph of that variable across time.
➢ Step 2: At the right corner of the graph, click on “Edit Graph” and, under the tab “Add Line”, look
for the following variables (click “Add data series” after selecting them):
❖ “Contributions to percentage change in real gross domestic product: Government
consumption expenditures and gross investment”
❖ “Contributions to percentage change in real gross domestic product: Net exports of
goods and services”
❖ “Contributions to percentage change in real gross domestic product: Gross private
domestic investment”
➢ Step 3: Now that we have all the components of our Real GDP, let’s add the data for the total
Real GDP variation. Click on “Edit Graph” again and, under the tab “Add Line”, look for the “Real
Gross Domestic Product” variable. Make sure that all the GDP components are in Percentage
Points at Annual Rate Units, and the Real GDP is in Compounded Annual Rate of Change Units; all
variables must be in Quarterly Frequency (check all that information under the “Edit Lines” tab).
➢ Step 4: Once you have all five variables in the graph, click on “Download” at the top of the graph,
and open the document at Excel or Google Sheets.
➢ Step 5: Rename the consumption variable column as “C”, government consumption and
investment as “G”, net exports as “X-M”, private investment as “I”, and the Real GDP as “GDP”.
In a new column, sum the four components of GDP. Remember that the expenditure components of GDP
can also be written in terms of % variation. Do we observe that relationship in the data?
Question
Describe the contributions of these components to US GDP growth during the GFC (2008) recession and
the COVID (2020 Q1 to 2020 Q2) recession and subsequent recoveries. What might explain the
differences seen in the role of consumption and investment during these recession and recovery phases
of the business cycle? From the contribution to GDP growth of government consumption, what can you
infer about the US government’s policy during the crisis (expansionary or contractionary fiscal policy)?
