Go to the St. Louis Federal Reserve FRED database, and find data on real GDP (GDPC1) and a measure of the price level, the personal consumption expenditure price index (PCECTPI). Convert the price index to inflation rate by setting the units to “Percent Change From Year Ago.” Download the data into a spreadsheet.

a) Calculate the level change in real GDP and the change in the inflation rate over the most recent four quarters of data available, and over the previous four quarters before that.

b) Based on your answers to part (a) (if assigned), explain, using a basic aggregate demand and supply analysis, how the economy could end up with the output and inflation outcomes from the data in part (a).