Actual and Potential GDP (a FRED question): Using the FRED database, locate the Congressional Budget Office’s...

Actual and Potential GDP (a FRED question): Using the FRED database, locate the Congressional Budget Office’s measure of potential GDP by searching for ”GDPPOT”. Using the ”Add Data Series” option, add the series ”Real Gross Domestic Product (GDP1)” to this graph. Adjust the sliders to show the data from around 1985 to the present.

(1) Display the graph.

(2) Download a graph of the ”investment share of GDP” (for gross private domestic invest- ment) and display those data graphically since 1990.

(3) How does this second graph help you understand the first graph in terms of the data since the Great Recession?

Expert Solution

Answer 1)

Graph from the Real Potential Gross Domestic Product from 1985 to present

Question 2)

Graph for Gross Private Domestic Investment from 1990

Question 3)

It can be explained that after the 2008 recession, the investment helps in showing the future capacity that production has held. It shows that as investmnet increases so does gross domestic product because

GDP = Consumptions + Gross Private Domestic Investment + Government Expenditure + Net Exports

Net Exports = Exports - Imports

Rahul Sunny answered 10 months ago

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