AAE 719: Applied Business Economics Assignment #1
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AAE 719: Applied Business Economics
Assignment #1
Due February 15th
Instructions: Please complete the assignment in Word or PDF formats . For the below questions, when asked to provide a “graph” , please use Excel, Stata, R or another statistical program to create your graph and then copy and paste it to Word or PDF . When answering questions, please use complete sentences . You should provide at least one paragraph (approximately 2 - 4 sentences) to answer each question . For the saving-investment diagrams, you can draw or illustrate these by hand or in a computer program . You only need to provide a sentence or two to explain your reasoning for the movements in these diagrams .
GDP and Inflation:
1. Graph the main expenditure components of GDP (consumption, investment, government expenditures and gross investment, exports and imports), in real terms, since the first quarter of 1947. Also graph the expenditure components as a share of total GDP . Do you see any significant trends?
2. Graph national saving and investment as fractions of real GDP, using quarterly U .S . data since 1947. How does the behavior of these variables in the past ten years compare to their behavior in earlier periods? How is it possible for investment to exceed national saving, as it does in some periods?
3. Graph the annual (December to December) CPI inflation rate and the annual (fourth quarter to fourth quarter) GDP deflator rate since 1960 on the same figure . What are the conceptual differences between these two measures of inflation? Judging from your graph, would you say that the two measures give similar or different estimates of the rate of inflation in the economy?
Productivity, Output & Employment:
1. Calculate and graph the growth rate of total factor productivity since 1960 using the FRED series RTFPNAUSA632NRUG . How would you characterize the movements in productivity since 1960? How do recessions affect the growth rate of productivity?
2. Plot a graph that includes the percent change in real GDP, U-3 unemployment and U-6 unemployment since 1960. How is growth in GDP and unemployment related? Which is a better indicator of unemployment in your estimation?
Consumption, Saving and Investment:
1. Graph consumer sentiment by the University of Michigan and percent changes in real GDP . Is consumer sentiment a good indicator of a coming recession? Why or why not?
2. Use the saving-investment diagram to analyze the effects of the following on national saving, investment, and the real interest rate . Illustrate the effects in a diagram and explain your reasoning .
a . There is a cultural shift such that consumers respond less to advertising, become less materialistic, and decide to save more of their income .
b . A wealthy benefactor decides to make 5G widespread across the country . This raises the productivity of cell phones, computers and other wireless devices .
c . The government chooses to go to war and makes a large investment in military equipment, funded by a temporary increase in taxes .
d . There is a temporary increase in taxes used to fund infrastructure projects, such as improved roads, bridges and ports .
2023-02-15