1. "One association frequently observed in economic reports is the direct relationship betweenchanges in the productivity of capital and the interest rate." We showed this in our AD/ASmodel when an increase in MPK resulted in a relatively greater shift in YD than YS, so that theinterest rate rose.====Now, to verify if this is true, go to the BLS Major Sector and Major Industry Total FactorProductivity and collect data on Capital productivity (Indexes 100.000) for the privatenonfarm business sector from 1987 to 2023. Next, go to FRED and collect data through 2023on the monthly prime bank loan rate (MPRIME, under Money, Banking, & Finance, thenInterest 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 ratedata; is the statement above (and our AD/AS model) consistent with the data?

By following these steps, you can analyze the data and determine if there is a consistent…

Answered: 1. "One association frequently observed…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.12P

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