EBK ECONOMICS OF MONEY, BANKING AND FIN
EBK ECONOMICS OF MONEY, BANKING AND FIN
5th Edition
ISBN: 8220106799727
Author: Mishkin
Publisher: PEARSON
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Question
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Chapter 22, Problem 2DAP

a.

To determine

To create: A scatter plot showing the deficit on horizontal axis and changes in and bond holding on vertical axis.

a.

Expert Solution
Check Mark

Explanation of Solution

Table showing calculation of change in public bond holdings, Federal Reserve bond holding and changes in debt held by public and federal reserve is as follows:

    PeriodBudget Deficitdebt held by publicdebt held by federal reservechange in debt held by publicchange in debt held by federal reservechanges in debt held by public and federal reserve
    1980-01-0173830699384120800.0---
    1981-01-0178968790060123575.0906762775.093450.5
    1982-01-01127977910039131825.01199798250.0128228.8
    1983-01-012078021111561146425.020152214600.0216122.3
    1984-01-011853671290387154900.01788268475.0187301.0
    1985-01-012123081494839170275.020445315375.0219827.5
    1986-01-012212271718347192700.022350822425.0245932.5
    1987-01-011497301889399210800.017105218100.0189152.3
    1988-01-011551782039260228175.014986117375.0167235.8
    1989-01-011526392175360227075.0136100-1100.0134999.8
    1990-01-012210362418033229700.02426742625.0245298.5
    1991-01-012692382704994253400.028696123700.0310661.3
    1992-01-012903213018001279350.031300725950.0338956.5
    1993-01-012550513279209315750.026120836400.0297607.8
    1994-01-012031863474962350600.019575334850.0230603.0
    1995-01-011639523645419370550.017045719950.0190407.3
    1996-01-011074313776614383950.013119513400.0144594.8
    1997-01-01218843835440412125.05882728175.087001.8
    1998-01-01692703803038442775.0-3240330650.0-1752.5
    1999-01-011256103715711479400.0-8732736625.0-50701.8
    2000-01-012362413508911507425.0-20680028025.0-178775.0
    2001-01-011282363360257536200.0-14865428775.0-119879.3
    2002-01-011577583526798599925.016654163725.0230266.0
    2003-01-013775853873789654100.034699254175.0401166.5
    2004-01-014127274276280694900.040249140800.0443290.5
    2005-01-013183464604003730650.032772335750.0363473.3
    2006-01-012481814853668768175.024966537525.0287189.5
    2007-01-011607015045710772900.01920434725.0196767.8
    2008-01-014585535701491505625.0655781-267275.0388505.8
    2009-01-0114126887345425673650.01643934168025.01811958.5
    2010-01-0112943738839123846725.01493699173075.01666773.8
    2011-01-01129959999969991572000.01157875725275.01883150.3
    2012-01-011086955111963921658100.0119939386100.01285493.3
    2013-01-01679542120413002003425.0844908345325.01190233.0
    2014-01-01484600127559622720300.0714663716875.01431537.5
    2015-01-01438496132472112802050.049124981750.0572998.5
    2016-01-01584651141210372827050.087382625000.0898826.0
    2017-01-01665372145625722862225.044153535175.0476710.3

Table (1)

Scatter diagram showing public bond holding on the vertical axis and deficit on horizontal axis is as follows:

EBK ECONOMICS OF MONEY, BANKING AND FIN, Chapter 22, Problem 2DAP , additional homework tip  1

Fig.1

The steep fitted line in Fig. 1 shows the strong relation between the change in debt held by public and deficit from 1980-2017

Economics Concept Introduction

Introduction:

When the planned expenditure of government exceeds the amount of revenue available to pay for it, it is known as budget deficit.

b.

To determine

To create: A scatter plot showing the deficit on horizontal axis and changes in and bond holding by Federal Reserve on vertical axis from 1980-2017.

b.

Expert Solution
Check Mark

Explanation of Solution

Diagram showing Federal Reserve bond holdings on the vertical axis and deficit on horizontal axis since 1980 to 2017, is as follows:

EBK ECONOMICS OF MONEY, BANKING AND FIN, Chapter 22, Problem 2DAP , additional homework tip  2

Fig.2

The steeper fitted line shows the positive relationship between bond holdings by the Federal Reserve and deficit but with less prognostic power.

Economics Concept Introduction

Introduction:

When the planned expenditure of government exceeds the amount of revenue available to pay for it, it is known as budget deficit

c.

To determine

To create: A scatter plot showing the deficit on horizontal axis and changes in and bond holding by Federal Reserve on vertical axis from 1980-2007.

c.

Expert Solution
Check Mark

Explanation of Solution

Diagram showing Federal Reserve bond holdings on the vertical axis and deficit on horizontal axis since 1980 to 2007, is as follows:

EBK ECONOMICS OF MONEY, BANKING AND FIN, Chapter 22, Problem 2DAP , additional homework tip  3

Fig.3

As the fitted line in Fig.1 suggests there was a positive relationship between bond holdings by the Federal Reserve and deficit from1980-2007.

Economics Concept Introduction

Introduction:

When the planned expenditure of government exceeds the amount of revenue available to pay for it, it is known as budget deficit.

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