Macroeconomics 12th Edition by Rudiger Dornbusch ,Stanley Fischer,Richard Startz

Exercise 2

Go to http://research.stlouisfed.org/fred2 and click on "Categories" then "National Income Product Accounts" then " Price Indexes Deflators." Find and download annual data for the GDP Implicit Price Deflator.
a. Use this data to calculate quarterly inflation.
b. Go back to the "Categories" page and click on "Interest Rates." Find and download quarterly interest rates for 1-year Treasury Bills.
c. Graph inflation and the nominal interest rate (you might want to use two different y-axes). Does the nominal interest rate appear to follow the rate of inflation
d. In the early twenty-first century, the nominal interest rate dropped to zero while inflation held constant at around.5 percent. What does this imply about the real interest rate during this period