1. Bank of Green Student Coaching

2. 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

3. 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”

4. 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

5. 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

6. Question 2: Aggregate Demand – Aggregate Supply

7. 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

8. Question 3: Money Supply and Interest Rates

9. 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.

10. 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.

11. 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)