Statistics project
Uploaded by CaseyP on May 10, 2019
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The Effects of Unemployment Rate and Inflation on Economic Growth
Introduction
The economic growth of a country is desirable since it leads to improved standards of livings. The Gross Domestic Product (GDP) indicates a countries economic growth. A higher GDP indicates higher economic growth. Several factors affect the GDP of a country. Some of the factors that influence the growth of the economy include inflation and the unemployment rate (Alisa 90). Inflation is the increase in the prices of goods and services of a country. Inflation is as a result of the decrease in the value of the currency hence an increase in inflation leads to a decrease in the economic growth. An increase in the unemployment rate leads to a decrease in the economic growth of a country. The unemployment rate decreases the purchasing power of individuals hence shrink the economy. This paper investigates the correlation between economic growth and inflation and the unemployment rate of the United States. A linear regression analysis will be used to analyze the data with GDP as the response variable and unemployment rate and inflation as the explanatory variables.
Method of Data Collection
The data used in the analysis involves the GDP, the unemployment rate, and the inflation of the population of interest which is the United States from the year 1985 to 2018 (Amadeo para 3). The data was obtained from the website The Balance. The website provides reliable data concerning the economic status of the United States. It provides the economic statistics and analyzes the performance with respect to the previous status.
Data Analysis
Scatter plot diagrams were used to show the graphical representation of the relationship between the response variable and the explanatory variables. The scatter plot diagram of GDP against unemployment shows a negative relationship between the variables. The scatterplot indicates a decrease in economic growth with the increase in the unemployment rate. The StatKey analysis also indicates the coefficient of correlation between the two variables. The coefficient of correlation indicates the direction and strength of the relationship. The coefficient of correlation of the relation between GDP and inflation is -0.576. The negative sign indicates a negative direction of the relationship. The figure also indicates a relationship of moderate strength. The coefficient of determination can be obtained by finding the square of the coefficient of correlation. The coefficient of determination is 0.332. This means that the regression model represents 33.2%...