This request requires an EXCEL spreadsheet with the correct results, along with a few sentences of text to interpret the results and their statistical significance. Your assignment is to estimate the relation between GDP and the money supply. This is an assignment from macroeconomics that asks the question: How influential are changes on the money supply (managed by the Federal Reserve Bank in the US) on the overall output of the US Economy. Why do we care? If we know the relation between money supply and GDP, as the Federal Reserve changes the money supply, we can predict the impact on the economy. The model is:

GDP = a + b (M1)

where M1 is a measure of the money supply that includes cash plus demand deposits. You know what GDP is from Outline 1. The EXCEL file, “GDP and Money Supply Data for Regression Assignment” has been posted. It contains data (in the second tab; the first describes the source of the data) on US GDP and the money supply, M1 from the 1st quarter of 1960 to the 1st quarter of 2019.

Please perform the following regression:

GDP = a + b (M1)

Write the estimated equation in the spreadsheet near the results from EXCEL and write a few sentences about it.

This equation estimates the relation between the level of output in the US economy and the supply of credit managed by the US Federal Reserve.

Recall that you have to “Add-In” the regression software in EXCEL as follows if you did not do it already:

Open the spreadsheet

click on “File”

click on “Options”

click on “Add-ins”

click on “Analysis ToolPak”

at the Manage Add-Ins at the bottom of the panel, select “EXCEL” and click on “go”

check “Analysis ToolPak-VBA”

click “OK”

click on “Data” on toolbar at the top of the EXCEL spreadsheet

click on “Data Analysis”

click on regression and follow the prompts in that panel

This assignment is to provide an exercise in performing regressions with EXCEL and to begin interpreting the results.