Bank of Green Student Coaching

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Bank of GreenStudent Coaching
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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
  
  

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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

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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

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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

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Question 2 Aggregate Demand Aggregate Supply
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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

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Question 3 Money Supply and Interest Rates

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Question 5Scatter 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.

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Question 5Regression Analysis

• Click Data/Data Analysis on right /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.

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Question 5Regression 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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