Go to the Web site of the Federal Reserve Bank of St. Louis (FRED) (research.stlouisfed.org/fred2/).
a. Locate the data for the Consumer Price Index (CPIAUCSL). Click on the "Download Data" link on the left of the page. Change the beginning date to six years prior to the most recent observation. You can leave the ending date as it is. Then click on the "Download Data" button to download the data and save it to your computer. Finally, open the Excel file that you just downloaded.
b. Using Excel, calculate the percentage change in CPI from a year earlier for each observation, beginning with the observation one year later than the first observation. To make this calculation, click on the blank cell next to the observation corresponding to that date and then enter the following formula (note that in Excel, the symbol for multiplication is *):

where tˆ’1 is the first observation and t is the observation one year later. Repeat this process for the remaining observations. (You can use the copy and paste functions to avoid having to retype the formula.)
c. Using your calculations from part (b), create a graph of the percentage changes from a year earlier.
d. Use your calculations from part (b) to explain which period experienced the highest inflation rate. What was the inflation rate during that period?

Transcribed Image Text:

CPI, - CPI,-1 CPI, –1 Percentage change x 100,