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GDP vs. Inflation
GDP is calculated through a number of measures. One of the most important is the rate of consumption. According to the research, "Consumption often makes up more than 50% of the GDP calculations of most nations. In some places, consumption makes up more than 70% of the GDP calculations" (Conjecture Corporation, 2014). Thus, increases in consumption can be tied to rising GDP reports. Thus, "the main relationship between GDP and consumption is the fact that a rise in the level of consumption translates to a corresponding rise in the level of the GDP" (Conjecture Corporation, 2014). It is thus an appropriate variable to use to represent the overall GDP of an economy.
In order to understand the relationship between inflation and GDP, interest rates will be examined alongside rates of consumption in millions. When there are lower interest rates, consumers spend more because...
This then increases levels of inflation according to the research. Thus, as rates are lower, it can be assumed that the inflation rate is growing. The hypothesis here is that when interest rates are low, and thus inflation is on the rise, consumption should also be on the rise.
X
Y
X2
Y2
X, Y
na
108408
na
Two-Sample Assuming Unequal Variances
Variable 1
Variable 2
Mean
5.199342
149966.7
Variance
0.973734
6.3E+08
Observations
65
65
Hypothesized Mean Difference
0
df
64
t Stat
-48.1558
P (T
References
Conjecture Corporation. (2014). What is the relationship between GDP and consumption? Wise Geek. Web. http://www.wisegeek.com/what-is-the-relationship-between-gdp-and-consumption.htm
Lexicon. (2014). Gross fixed capital formation. Financial Times. Web. http://lexicon.ft.com/Term?term=gross-fixed-capital-formation
Roos, David. (2013). How interest rates work. Money. Web. http://money.howstuffworks.com/interest-rate4.htm
Spagnoli, Filip. (2012). Statistics on gross domestic product (GDP) correlations, Human Rights. Web. http://filipspagnoli.wordpress.com/stats-on-human-rights/statistics-on-gross-domestic-product-correlations/
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