Does a Phillips curve relationship exist in the data set provided?

- The relationship for the data is hard to find. It may exist for some measures of prices and real
economic activity and not for others.

What are the key business cycle regularities in the labour market?
- In the labour market, employment is procyclical, lagging, and less variable than real GDP. Real
wage is procyclical, and average labour productivity is procyclical, coincident, and less variable
than real GDP

Employment N is procyclical. Therefore, in a boom (recession), both increase (decrease). However, since
the output is more variable than employment, Y/N is procyclical since Y will typically increase (decrease)
proportionally more than N during a boom (recession).

Expenditure on durable goods is more like expenditure on Investment, while expenditure on nondurable
goods is more like expenditure on consumption. Investment tends to have larger variability relative to
GDP which is demonstrated by a larger standard deviation. Consumption tends to have Smaller
variability relative to GDP which is demonstrated by a smaller standard deviation.

rom the 1981–1982 recession until the mid-1990s, the price level appears to be countercyclical. After
2000, the price level appears to be procyclical.

During the 1970s, there is a positive correlation between the percentage deviation from trend in real
GDP and deviation from trend in the inflation rate. Therefore, the inflation rate is Procyclical. Since there
is a positive correlation, this is consistent with the traditional Phillips curve idea.

Suggest two macroeconomic variables, other than stock prices, that could potentially be leading
variables. Explain why these are likely to be good leading variables.
- Interest rates and bank deposits could potentially be leading variables since they tend to aid in
predicting the future path of real GDP and they respond quickly to macroeconomic shocks,
including current shocks and anticipated future shocks.