Assignment 1 - Spring2016 Assignment#1 DueDate:February18,2016 1..Use PriceLevel Year to Year Nominal GDP RealGDP($billionsin Inf

Assignment 1 - Spring2016 Assignment#1...

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Unformatted text preview: Principles of Macroeconomics Spring 2016 Assignment # 1 Due Date: February 18, 2016 1. The information in the table gives the price level and nominal GDP values for ten years. Use this information to answer the questions below. Price Level Year to Year Nominal GDP Real GDP ($ billions in Inflation Rate (%) ($ billions in 1976 prices) current year prices) 1976 100 198 198 1977 106.4 6.4 218 204.9 1978 112.6 242 1979 123.9 276 1980 137.2 310 1981 152.1 356 1982 165.2 374 1983 173.5 406 1984 178.9 445 1985 183.5 478 a. Fill in the table above. b. Explain the difference between inflation, deflation and disinflation. c. Did this economy experience a recession based on the time path either of nominal or real GDP? 1 2. Consider the following table of information Government Purchases of Goods and Services 168 Farmers' Income 2 Depreciation (capital consumption allowance) 92 Personal Consumption Expenditures 454 Imports 244 Wages, Salaries and Supplementary Labor 409 Income Interest and Miscellaneous Investment 56 Income Exports 249 Income of non‐farm unincorporated 41 businesses Investment 123 Indirect taxes minus subsidies 93 Corporate Profits Before Taxes 57 a. Calculate GDP via expenditure approach. b. Calculate GDP via income approach. c. Suppose that government taxes were 145, given this additional information identify and give values for leakages and injections, are leakages equal to injections? 3. From the FRED website at the Federal Reserve Bank of St. Louis (you can Google it), download the following data for the time period 1959‐2014: GDPC96, PCECC96, GPDIC1, GDPDEF, CNP16OV, M2SL and TB3MS. Figure out how to download quarterly data only, and when given the choice, choose quarterly averages. Next, compute the following as time series in Excel: Y = (((GDPC96/4))/(CNP16OV))×1000000, y = ln(Y) C = (((PCECC96/4))/(CNP16OV))×1000000, c = ln(C) I = (((GDPIC1/4))/(CNP16OV))×1000000, I = ln(I) M = (((M2SL/GDPDEF)×100)/(CNP16OV))×1000000, m = ln(M) P = ((GDPDEF)/(GDPDEF_{previous value})), π = ln(P) R = (1/((1‐TB3M/400))), r = ln(R) Given these data answer the following questions; when needed use the software of your choice to compute the answers (e.g. EXCEL etc.) a. For each of y,c,i,m, π,r compute the growth rate for the entire sample period (from the first datapoint to the last) and the means and standard deviations for each of the variables. Report the growth rate, means and standard deviations. Describe in words what you observe about the pattern of means and standard deviations across the variables. 2 b. Plot each of the variables as time series. That is, t on the horizontal axis and the variable value on the vertical axis. Fit a linear trend to each of the variables (in Excel you can right click on the time series and choose "fit trend"). Report what you observe about the trends of each of the variables? c. Compute the correlations of these variables with each other and the correlations of these variables with their own one period lagged values and report these numbers. Describe in words the pattern of correlations that you see. 4. From the Gapminder website, download the Excel spreadsheet for the following variable: Income per person (GDP/capita, PPP$ inflation‐adjusted).Given these data answer the following questions; when needed use the software of your choice to compute the answers (e.g. EXCEL, STATA, MATLAB etc.) a. How many countries have data for each of the years from 1800 to 2011? b. For the countries you have identified in part (a) above, compute the growth rate of income per person between 1800 to 2011 and rank them from highest to lowest growth rate. Report the highest ranked country and the lowest ranked country. c. Use the data for the countries you have identified in part (a) above to compute year to year changes in income per person. Which country is the most volatile? Which country is the least volatile? How should you measure volatility? d. Choose one of the countries from the set of countries you have identified in part (a) above. For that country choose one variable from Gapminder that you think is correlated with income per person. Download the relevant data and plot it against income per person. What does the plot say to you? Can you write down a causality behind why you think the correlation is meaningful? 3 ...
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