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Bank of Green Student Coaching

Bank of Green Student Coaching. What is the Case About?. Review Federal Reserve Stabilization Policy Play with Some Economic Numbers Apply Statistical Regression

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Bank of Green Student Coaching

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  1. Bank of GreenStudent Coaching

  2. What is the Case About? • Review Federal Reserve Stabilization Policy • Play with Some Economic Numbers • Apply Statistical Regression • Incorporate Findings in Report Intended for Your Peers at the bank

  3. Basics of Stabilization Policy(Standard Fed Version) • Economy Fluctuates Around a Trend Rate of Growth • Too Fast Growth is Bad as it Leads to Inflation • Too Slow Growth is Bad as it Causes Unemployment • Stabilization Policy • Forecast Inflation and Output Growth in the Near Future • “Lean Against the Wind”

  4. Question 1: Looking at the Data on the Spreadsheet • Percent Change = (New Value – Old Value) Old Value E. g. Percent Change = (101 – 100)/100 = .01 or 1% • Inflation is Calculated as the Percent Change in the GDP Price Deflator GDP Deflator = 100*(Nominal GDP)/(Real GDP) E.g. Deflator = 100*(4000)/(5000) = 80.0

  5. Question 2: Aggregate Demand – Aggregate Supply • Aggregate Demand (AD) – Quantity of Goods and Services that Households, Firms, and the Government Want to Buy at Each Price Level • Long Run Aggregate Supply (LRAS) – Production of Goods, Services (Real Output) Depends on Supply of Labor, Capital, Natural Resources, Technology – Price Level Does Not Affect • Short Run Aggregate Supply (SRAS) – Quantity of Real Output Supply at Each Price Level

  6. Question 2: Aggregate Demand – Aggregate Supply

  7. Question 3: Money Supply and Interest Rates • Interest Rate (Price of Money) - Determined in a Market for Loanable Funds • Money Demand Curve Shows Relationship between Money Demand and Interest Rates • Money Supply – Quantity of Money Fixed by the Federal Reserve

  8. Question 3: Money Supply and Interest Rates

  9. Question 5:Scatter Plot • Click Insert/Chart/XY (Scatter) then click Next. • Be Sure Cursor is on Data Range Window, Highlight Two Data Columns, then Click Next. • Add Titles to Chart & Click Next. • Check New Sheet and Click Finish. • Click a Datum Point on Chart with Right Mouse Key, Add Trendline, & Click Linear.

  10. Question 5:Regression Analysis • Click Tools/Data Analysis/Regression & Click OK. • On New Window Check Labels Box and Put Cursor on X Range. • Highlight X Data Including Label. • Put Cursor on Y Range & Highlight Y Data (Including Label), Then Click OK. • Click Format/Column/AutoFit to Widen Columns.

  11. Question 5:Regression Analysis • R Square – Coefficient of Determination – Percent Variation in Rate of Inflation (Y) Accounted for by Variation in Growth Rate of Money (X). • X Coefficient Measures Slope of Trend Line. (Positive Sign - Positive Relationship, Negative Sign – Negative Relationship) • P-Value Measures Observed Level of Significance. (Probability of Error)

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