Answer to Question #214162 in Macroeconomics for Anisha Radhika Kum

Question

neral Government Investment Private Public Enterprises Investment 1980 4.61 20.78 1981 6.89 19.66 1982 5.48 18.12 1983 3.17 17.76 1984 2.97 14.12 1985 3.10 15.06 1986 2.96 11.77 1987 2.29 13.40 1988 2.54 9.52 1989 3.24 8.80 1990 3.27 9.25 1991 4.01 10.44 1992 2.99 8.47 1993 2.51 11.96 1994 2.58 9.41 1995 2.43 10.33 1996 2.99 13.71 1997 3.20 15.60 1998 3.37 23.58 1999 3.42 18.00 2000 2.91 12.46 2001 3.68 11.62 2002 4.56 14.61 2003 4.05 17.41 2004 3.44 15.06 2005 3.05 16.58 2006 3.21 13.92 2007 2.17 11.20 2008 2.56 18.30 2009 4.03 12.17 2010 2.88 13.00 2011 3.14 14.93 2012 3.47 11.45 2013 4.87 21.09 a) Compute the main measure of variability and identify the expenditure that is more volatile.b) Compute and interpret the correlation between General Government Investment and Private Public Enterprises Investment.c) Use an appropriate graphical tool to examine the nature of relationship between 2 series.Is a linear model suitable?

Answer 1

a)The standard deviation of general government investment is 0.9696, whereas that of private public enterprises 3.8616. The investment variability of private public enterprise is greater than that of the general government.

b)The correlation between general government investment and private public enterprise investment is 0.5045, indicating a positive connection with high degree of relationship.

c)The scatter diagram demonstrates that the above two metrics have positive connection.