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Transcript
```Banking with Trust
Student Coaching
1
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
2
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”
3
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
4
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
5
Question 2: Aggregate
Demand – Aggregate Supply
LR A S
Price
Level
SRAS
P
AD
Y
Real Output
6
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
7
Question 3: Money Supply
and Interest Rates
Interest
Rate
MS
R
MD
Money
8
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.
9
Question 5:
Regression 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.
10
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)
11
```