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# Name ________________________________________ Date ________ last 4 PSU ID _______ Economics 304 Homework 2 190 points Instructions: Please show all...

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Name ________________________________________ Date ________ last 4 PSU ID _______ Economics 304 Homework 2 190 points Instructions: Please show all work or points will be taken off. Good luck! 1. (80 points total – 10 points each part) In this homework assignment, we are getting our ‘hands dirty’ to get familiar with some of the major macroeconomic variables that we will be using and working with throughout the semester. Our first chapter with ‘something to sink our teeth into’ is chapter 3 and it is all about the factors of production, the labor market, and of course, the production function. Major variables in this part of the macroeconomy (i.e., the supply side of the economy) include, but certainly are not limited to, employment (denoted N), real wages (denoted w = W/P where W = nominal wage and P is the price index - typically the CPI) and real GDP (denoted Y). When we move to chapter 4 we encounter many more major macroeconomic variables including consumption (C), investment (I), and the real interest rate (denoted r), among others. We are going to use FRED as our source of data (many professional economists use this site, nice clean data!) 1 I provide you with the links to the data that is needed throughout this assignment. For an interesting look at the %ΔW vs. the %ΔP, see this graph from the FRED site . As we move forward through the class, we are going to learn about some “business cycle facts.” See page 290 in text, Chapter 8. In this first question, among other things, we are going to investigate the behavior of the real wage over the most recent business cycle. (See the National Bureau of Economic Research (NBER) site - look at right hand side of page for the official dates of the most previous 4 recessions). In particular, we are going to calculate the percent change in the real wage during the most recent recession (12/07 – 6/09) and compare it to the percent change during the most recent recovery, 7/09 to the present. 1 FRED stands for F ederal R eserve E conomic D ata.- see the FRED website .
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