Statistics of Inflation, GDP, and Unemployment Research Paper

GDP vs. Inflation

GDP is calculated through a number of measures. One of the most important is the rate of consumption. According to the research, "Consumption often makes up more than 50% of the GDP calculations of most nations. In some places, consumption makes up more than 70% of the GDP calculations" (Conjecture Corporation, 2014). Thus, increases in consumption can be tied to rising GDP reports. Thus, "the main relationship between GDP and consumption is the fact that a rise in the level of consumption translates to a corresponding rise in the level of the GDP" (Conjecture Corporation, 2014). It is thus an appropriate variable to use to represent the overall GDP of an economy.

In order to understand the relationship between inflation and GDP, interest rates will be examined alongside rates of consumption in millions. When there are lower interest rates, consumers spend more because it cost less to use credit and purchase larger purchases (Roos, 2013). This then increases levels of inflation according to the research. Thus, as rates are lower, it can be assumed that the inflation rate is growing. The hypothesis here is that when interest rates are low, and thus inflation is on the rise, consumption should also be on the rise.

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Two-Sample Assuming Unequal Variances

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5.199342 149966.7 Variance 0.973734 6.3E+08 Observations 65 65 Hypothesized Mean Difference 0 df 64 t Stat -48.1558 P (T<=t) one-tail 2.7E-52 t Critical one-tail 1.669013 P (T<=t) two-tail 5.4E-52 t Critical two-tail 1.99773 The hypothesis here was that increasing interest rates would signify a decrease in inflation and decreasing interest rates would suggest increasing inflation. It was assumed that there was a negative correlative relationship between the two variables. The statistical analysis does confirm this assertion. In fact, there is an obvious negative correlation between inflation and consumption. The slope of the tread line in the regression analysis shows a clear declining relationship. Based on the regression analysis, it is clear that as interest rates rise, consumptions decrease. As interest rates increase, which are indicative of decreasing inflation, rates of overall consumption decrease alongside. Thus, the T. Stat -48.1558 < T Critical two-tail 1.99773 shows that the hull hypothesis is rejected. When the T. Stat is less that the Critical two-tail test, it is clear that the two variables being analyzed are in fact related. This means that there is enough of a statistical correlation between the two variables to assume that one changes, it impacts the other. Clearly, this demonstrates that rising inflation correlates with higher spending and thus consumption. When interest rates rise, noting decreasing inflation, consumption also decreases. Thus, there is a positive relationship.....