Using FRED Data to Understand Business Cycles
Overview
An in class exercise using economic data to better understand business cycles.
This exercise helps students understand business cycles through use of the Federal Reserve Economic Data (FRED). It is recommended for in class use, in order to engage in discussion and conversation.
First, direct students to the FRED website: https://fred.stlouisfed.org/
In the search bar, type: Real GDP per capita.
Select the option for Real GDP per capita quarterly, 2012 dollars.
Students should now see a graph of GDP data. You can have them edit it in a variety of ways. Try something simple to start: use the date range boxes at the top right to change the start date to 1995 and end date to 2019 in order to focus on the two recessions in 2001 and 2007.
Another interesting option is to have them click on "Edit Graph," then change the Units to "Percent Change from Year Ago."
Now you can guide them through a discussion and analysis of what business cycles, especially recessions, look like. Using the data can also help with an understanding of the ways in which recessions are identified.
Suggested topics of discussion: What are the highest and lowest growth rates on the graph? Why is growth important? What is a peak and a trough, a recession and an expansion? During the recession of 2007-09, how could you tell that a recession had started? What stands out about that recession compared to the one before?
Graph in header taken from the FRED website: U.S. Bureau of Economic Analysis, Real gross domestic product per capita [A939RX0Q048SBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/A939RX0Q048SBEA, March 29, 2020.