Ratio of total real government purchases to real GDP

Reference no: EM13696621

Calculate by using Federal Reserve Bank of St. Louis's FRED database

Calculate the ratio of total real government purchases to real GDP, quarterly, from 1947 to 2012. Also, calculate the real interest rate on a quarterly basis as a three-month Treasury bill rate minus the inflation rate. Plot these two variables as a time series. The ral intertemporal model predicts that a temporary increase in government spending increases the ral interest rate. Do you observe anything in your chart that is consistent with that prediction?

Why or why not?

Reference no: EM13696621

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