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Data for the Economics ExampleInterest RateFutures IndexDay7.443 7.48 8.00 7.75 7.60 7.63 7.68 7.67 7.59 8.07 8.03 8.00221 222 226 225 224 223 223 226 226 235 233 2...

Question

Data for the Economics ExampleInterest RateFutures IndexDay7.443 7.48 8.00 7.75 7.60 7.63 7.68 7.67 7.59 8.07 8.03 8.00221 222 226 225 224 223 223 226 226 235 233 24110 1 12

Data for the Economics Example Interest Rate Futures Index Day 7.443 7.48 8.00 7.75 7.60 7.63 7.68 7.67 7.59 8.07 8.03 8.00 221 222 226 225 224 223 223 226 226 235 233 241 10 1 12



Answers

The table gives interest rates for various U.S. Treasury Securities on February $15,2011$ (a) Make a scatter diagram of the data. (b) Which type of function will model these data best: linear, exponential, or logarithmic? $$\begin{array}{c|c}\text { Time } & \text { Yield } \\\hline 3 \text { -month } & 0.13 \% \\\hline 6 \text { -month } & 0.17 \% \\\hline \text { 2-year } & 0.84 \% \\\hline \text { 5-year } & 2.35 \% \\\hline \text { 10-year } & 3.61 \% \\\hline \text { 30-year } & 4.66 \% \\\hline\end{array}$$

In economics, we oftentimes use real data instead of nominal data and that's because this allows us to make comparisons more easily. It tends to be far more useful than nominal data. And so we run into this issue of converting nominal data to real data. And in order to do that, the first step is to identify some base here that you want to use. And this base here is going to be that Year in which all of your data. So your dollars are all going to be in say $1999, right? It's going to take into account that impact of inflation that's occurred over time. And whatever base here you choose, it really is arbitrary. You can choose whichever base here you want. You just have to keep in mind that that is your base here, right? The next step is to choose some sort of an index and this indexes was used to actually convert the measurement. So if we're working with say GDP, we use what is called a GDP deflator and that gives us this idea of how inflation has impacted GDP over time, so that we're able to convert our nominal GDP into our real GDP. So it really is quite simple. Basically you need first to select your base here and then you need some sort of index to use within that dataset to allow you to convert your data to real data.

For this question we're giving that we act to use the data to construct a stock back charts for a five day period. I'm gonna be joined the data just so it's easy to construct the bad shots, So yeah, the bar shot. The data should look like this with the days. 12 34 and five old one volume over here. Close over here. Hi. Over here. On a low over here. So this is what the data should look like. We're going to construct a stock shot stock back charge for five day period. So this is the stock Backtracks is one of the what type of charts. Because he has more information on they could be use it. They could be used easily. So the top on the bottom off the can do show the lowest that I s price off. The specific day on the body is black. If the this opening is higher than the closing on green dress dress up. So I'm going to be drawing the the charts so you can understand better what I mean. So So we're gonna be having 63 over. Yeah, 62.5. Over here. 62 Over here. 61 over here. All right, at 61.5 over here. When we have a 60 right here. 61 over here, 60.5 over here. 60 over here to 9.5 for here. Their fifth tonight. Over here. You see, AIDS 0.5 over here. 58 over a year. 57.5 Over here. 57 Over here on this is the end. And they would draw the line back. Yeah. So this is the volume at this side. This is the volume on the volume is a millions. By the way on, these are the days and the days are numbered. 18. They want day two day three before they five like that on. Then we're going to rejoin the stock about bar charts. So for day one, we can see that, um, it's gonna be like this. Swim 69 59.5. So this point, something like this, and then this should be She did right. This is shaded. And then we have a stream like this. So this is where she look like, all down to 59. Then the second one for dates to should be from 60 all the way to food tonight and then the books to 60.5. I mean, that's it. And then date three should be from 59.5 all the way to 60 and then this should be shaded with the same point. And then the next one 61 right here, left to 9.5. Why? Yeah, And then this goes to loosen I and then last one day five goes from 61 right here, 60.5 unshaded. So this is what the stock bar chart should look like. Like I said is one of the most important type of charge. Because, like this, you could easily get more information that previous easily. We could tell that the top and the bottom, the top on the bottom of the candle shows the lowest and I s price off the specific day. So the top is the I s. The bottom is the lowest price off that day, right? Because this is it's on, then the body is black. If the day's opening is higher than the closing on green, if it's vice versa. So now we can tell that from the both the candlestick. The portion should agree, which is this Are those with closing lower than the opening. So the gray shaded, though at those weeds closing lower, then the opening on the boxes which have lines. Oh, I forgot to draw the lines. The boxes. Which of lying are those weeds? Okay, Hi. In the price true day. Because if you go back to the diagram, you can see that this have a high price to the day. But the ones with the great shifted at those that are closing the weather in the opening, and that's the answer to the question.

All right here. We're taking a look at a macroeconomic concept of saving and investment and how it all relates within the financial system and were given information about a closed economy were given that they have a GDP of $10,000 consumption equal to $6000. Taxes equal to $1500 and government spending equal to $1700 were also given their investment function, which is equal to 3300 minus 100 are where ours are real interest rate. And what we would like to do is calculate our private saving, public saving, national saving investment and the real interest rate. So let's go ahead and start with our private savings. And we can recall that private savings are equal to Y minus T minus c so we can plug this and we were given all of this information, which means we have 10,000 minus 1500 minus 6000, and that gives us 2500 for our private savings. Moving on to our public saving, we can recall that this is equal to T minus g again, just plugging in what we already have, where we have 1500 minus 1700. This gives us a negative 200 for our public saving and national saving. We can recall here that national savings is equal to Y minus C minus, G plugging this information in, we've got 10,000 minus 6000 oops, minus 1700. That gives us our national savings, which is equal to 2300 and for investment. We can recall that investment is equal to savings. So in this case, it's just gonna be 2300 again because we just found that a national saving is equal to 2300. Meeting our investment must also equal to 2300. Now, if we wanted to calculate our real interest rate, we're going to use the function that was given to us up here. We know what our investment is. We just found that it's 2300, so it gives us 2300, which is equal to 30. 300 minus 100 are solving for our. What we'll do is we'll subtract 3300 from both sides giving us a negative 1000, which is equal to negative 100 are dividing both sides by negative 100. We get that R is equal to positive 10

The following information is collected about the economic for a particular year income which is expressed as why Physical to 10,000 conduction which is expressed at sea Is equal to 6000 X. Which is expressed as P is equal to 1500. Government is spending which is expressed as G. Physical too 1700 and investment function which is expressed as I Physical too 30 300 0 are now we have to find private saving, public serving national savings, investment and the equilibrium interest rate. Using the following formula we know that private saving yeah is defined as Why -7-. See putting the value of Y. T. And C. From the ever. We will get the value of private seven here. The value of Y. is 10,000. The value of T. Is 1500. And the value of c. e. 6000 solving this, we will get 2500. No public survey is defined as b minus G. Similarly we will put the value of tng to find public saving Where the value of T. is 1500 And the value of g. solving this, we will get minus 200. Her negative sign indicates that it is a budget deficit. Budget deficit occurs when expenditure exits revenue over a certain period of time. But we really fine. National saving. National saving is defined as public saving plus private saving. National serving is defined as driver saving plus public seven. Mhm. The value of private city is 2500 and the value of Public service is -200 solving this. We will get 23. Okay no we will find it cuba liam interest rate which is calculated by equipping saving physical to investment. So delirium interest rate which is expressed as our his legal too saving equal to investment. Mhm. Yeah The value of saving is 2300. And uh Investment Faxon is given 30 300 0. Are this implied 100? Our physical too 3300 -2300. This imply 100 r. is equal to 1000. This imply our physical too 1000 Divide White. And that Jiro Jiro, will we cancel this people to 10%? Yeah. Yeah. Does investment you know? Okay. Something is the kyoto 3300 minus 100 up The value parties 10%,, solving this. We will get 3290. Hence the value of private saving is 2500. The value of public saving is -200. The value of national saving is 2300. And the equilibrium interest rate R is equal to 10%. And Investment is going to 3290. Thank you. Yeah.


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