Quick Summary

To access GDP.xls, visit

GDP.xls explains how to use the FRED Excel add-in to access GDP data and offers several simple analyses using GDP. The focus is on understanding basic national income accounting and becoming aware of a few facts about GDP, including the current state of the economy. Investment is highlighted as the most volatile of the major aggregate expenditure categories, and it is decomposed in two ways: (1) as replacement and net investment and (2) into its three main components, fixed nonresidential, residential, and changes in business inventories.

Screencasts

1. • http://vimeo.com/econexcel/gdpshares: download U.S. GDP data and show that GDP = C + I + G + NX; also computes shares of GDP for C, I, and G, showing that C is the largest of the three

2. • http://vimeo.com/econexcel/gdpfluctuations: download real and potential GDP and the FRED add-in's graphing tool plots the two series; percentage change data are used to better illustrate fluctuations and the fact that I is volatile and primarily responsible for variability in GDP

3. • http://vimeo.com/econexcel/gdpinvcomponents: download three components of investment: (1) tools, plant, and equipment; (2) housing; and (3) changes in business inventories in an attempt to find the source of volatility in investment; in addition to simply plotting the three over time, they are converted into standard units.

Introduction

Every macro book has definitions of various categories of aggregate spending, along with graphics of circular flows and descriptions of the system of national accounts used to produce familiar statistics on income and output. None of this is repeated here. Instead, the focus is on obtaining GDP and its components from FRED and gaining familiarity with the current state of the economy.

The GDP.xls workbook presents only the most fundamental concepts. FRED has an absolute treasure trove of national income aggregates. It makes sense to search FRED's database and develop your own exercises and examples. In fact, FRED is so easy to use that you can safely assign open-ended discovery and exploration tasks for your students.