1. "One association frequently observed in economic reports is the direct relationship between changes in the productivity of capital and the interest rate." We showed this in our AD/AS model when an increase in MPK resulted in a relatively greater shift in YD than YS, so that the interest rate rose. ==== Now, to verify if this is true, go to the BLS Major Sector and Major Industry Total Factor Productivity and collect data on Capital productivity (Indexes 100.000) for the private nonfarm business sector from 1987 to 2023. Next, go to FRED and collect data through 2023 on the monthly prime bank loan rate (MPRIME, under Money, Banking, & Finance, then Interest Rates) for the same time period. You can set the frequency from monthly to annual (use the average aggregation method), and you can set the starting date as 1987-01-01. Export/download the annual prime rate data and report the correlation [=correl(MPk column, prime rate column) in Excel] between the annual productivity data and the annual interest rate data; is the statement above (and our AD/AS model) consistent with the data?
1. "One association frequently observed in economic reports is the direct relationship between changes in the productivity of capital and the interest rate." We showed this in our AD/AS model when an increase in MPK resulted in a relatively greater shift in YD than YS, so that the interest rate rose. ==== Now, to verify if this is true, go to the BLS Major Sector and Major Industry Total Factor Productivity and collect data on Capital productivity (Indexes 100.000) for the private nonfarm business sector from 1987 to 2023. Next, go to FRED and collect data through 2023 on the monthly prime bank loan rate (MPRIME, under Money, Banking, & Finance, then Interest Rates) for the same time period. You can set the frequency from monthly to annual (use the average aggregation method), and you can set the starting date as 1987-01-01. Export/download the annual prime rate data and report the correlation [=correl(MPk column, prime rate column) in Excel] between the annual productivity data and the annual interest rate data; is the statement above (and our AD/AS model) consistent with the data?
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.2P
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