.Define real potential GDP and the PCE price index.

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• 1.Excel Exercise.

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nI have posted an EXCEL file. The file contains quarterly data for actual and potential real GDP and the inflation rate as measured by the PCE price index. Use this data to do the following:nnA.Define real potential GDP and the PCE price index.nnB.The output gap is defined as (actual RGDP minus potential RGDP) / potential RGDP. Calculate the output gap for EACH quarter. Do not leave as a decimal. Multiply by 100 to get percent. For example, in 2007Q1 you should get -0.1404 for the output gap. Put this in row 7.nnC.The inflation rate is in percent (meaning 2.3 is 2.3 percent).Assume the Fed’s target inflation rate is 2 (percent). The inflation gap is defined as actual rate of inflation minus target. Calculate the inflation gap. Put this in row 8.nn(After you do the requested calculations, just copy paste the first 12 quarters of your work.nNo need to try to print the entire numerous quarters.)nn2.The Fed has been reducing its balance sheet by letting US Treasury secruities mature and NOT reinvesting the proceeds. Show how this transaction is recorded on the Fed’s balance sheet. You must do the researchnn