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Project Assignment
October 5, 2010
EC 351
Project Assignment #1

1. The topic I chose for my project is “What effect does the inflation rate have on the gross domestic product (GDP) of the United States of America?” I would like to study the relationship between the inflation rate and the GDP and decide whether or not the GDP mimics the inflation rate. 2. This topic is interesting and important because it affects the monetary policy of the United States of America. The inflation rate affects everything from wages to the price of a cheeseburger. The GDP is the measure of a country’s economic output. How the inflation rate affects the GDP has a significant impact on the United States’ economy. GDP and standard of living are positively correlated …show more content…
The source for the GDP and gross private domestic investment (GPDI) is the Bureau of Economic Analysis’s website, http://www.bea.gov/. In order to get the data on this website I went to the “Gross Domestic Product” link on the home page, then I went to the “GDP and the National Income and Product Account Historical Tables” link on the next page, then I went to the “Frequently Requested NIPA Tables” link, I clicked on the “Table 1.1.5. Gross Domestic Product (A) (Q)” link, then I changed the first year to “2007-A&Q” and the last year to “2009-A&Q”. This will give you both the GDP and GPDI. The source for the inflation rate, unemployment rate, and consumer confidence index (CCI) is http://tradingeconomics.com/. In order to get the data on this website I went to the “Indicators” link on the home page, then I went to the “United States” link on the next page, then I clicked on the “Inflation Rate” link for the inflation rate, the “Jobless Rate” link for the unemployment rate, and the “Consumer Confidence” link for the CCI. Once I was on each of these pages I adjusted the time periods to match my sample. The source for the productivity data came from the Bureau of Labor Statistics’s website, http://www.bls.gov/. In order to get the data on this website I went to the “Productivity” link on the home page, I then went to the “ Labor Productivity” link, then I went to the “Productivity and Costs” link under the word “Archived”, from here I clicked on the PDF …show more content…
I am using time-series data for this project. The GDP is the dependent variable measured in billions of current United States dollars. The inflation rate, unemployment rate, and productivity in the nonfarm business sector are independent variables measured in percent inflation, percent unemployed, and percent change in productivity in the nonfarm business sector respectively. The CCI is an independent variable measured by comparing the average monthly consumer confidence to the base year of 1985 (CCI in 1985=100). The post-Bush variable is an independent, dummy variable. Each variable is continuous and neither cardinal nor ordinal. The post-Bush variable is categorical and the coding scheme to turn it into a dummy variable is a zero for months with Bush in office, and a one for months after the November 2008
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