Go to the St. Louis Federal Reserve FRED database, and find data on potential output (GDPPOT), real GDP (GDPC1), and a measure of the price level, the personal consumption expenditure price index (PCECTPI). For the price index series, choose the units as “Percent Change From Year Ago.” Download the series onto a spreadsheet. Create a measure of the output gap, defined as the percentage difference between (actual) real GDP and potential GDP, for each quarter.

a) Identify the periods, from 2000 to the most recent data available, in which output is consistently either above or below potential (ignore an isolated quarter that switches or is transitory).

b) For each of the periods identified in part (a), calculate the average output gap and the percentage point change in the inflation rate from the beginning to the end of the period.

c) Are your results in part (b) consistent with an accelerationist view of the Phillips curve? Why or why not? Briefly explain.