3. The Federal Reserve Bank of St. Louis is the center of the Eighth District of

Question

3. The Federal Reserve Bank of St. Louis is the center of the Eighth District of the Federal Reserve System. This District includes Arkansas, eastern Missouri, southern Illinois and Indiana, western Kentucky and Tennessee, and northern Mississippi. The Federal Reserve District provides a multitude of secondary data on labor markets, financial markets, the national economies among others. 3.1) Find the 2016 real average family income at https://fred.stlouisfed.org/series/MAFAINUSA672N (5 points) 3.2) Find the 2016 real median household income at https://fred.stlouisfed.org/series/MEHOINUSA672N (5 points) 3.3) (10 points) Explain why your answers to 3.1) and 3.2) are vastly different

Explanation / Answer

3.1) The 2016 real average family income is $ 99,451.

This is for the period between 01/01/16 till 12/31/16.

3.2) The 2016 real median household income is $ 60,309

This is for the period between 01/01/16 till 12/31/16.

3.3) There is a difference of $ 39,142.

This difference is majorly because,

The mean is the average across all families. The median identifies the family income in the middle of the sample for every year: half of incomes are higher, half are lower.

Estimation of Median Incomes. The Census Bureau has changed the methodology for computing median income over time. The Census Bureau has computed medians using either Pareto interpolation or linear interpolation. Currently, we are using linear interpolation to estimate all medians. Pareto interpolation assumes a decreasing density of population within an income interval, whereas linear interpolation assumes a constant density of population within an income interval.

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