1.

Research Question

1. What is effect of GDP on inflation rate in United States in 1989 to 2019?

2. What is effect of GDP on unemployment rate of USA in 1989 to 2019?

3. What are key implications of GDP role in economy of USA?

2. Motivation/Background

GDP, Inflation and unemployment rates are three different pillars of economy.

Inflation can state the either enhancement of the supply of money or the enhancement of the

price levels. The increase in the supply of money will enhance the prices of services and

products as ample of supply of easy money will boost the people to enhance the demand and

spend more for all forms of the goods. It leads to the enhancement of the prices. The inflation

is good for the economy on the surface. As, the high demand will lead to the higher rate of

the production and it will enhance the overall GDP and throughput. Enhanced GDP is

observed by most of the researches as strengthening stock market as investors are mostly

excited for their profitability of the companies which has the strong link with the GDP and

production throughput. The growth in the GDP is mostly coupled with the stringent rules of

the labor market. It will enhance the rate of inflation. Enhanced inflation can quickly enhance

the changes of control. People will spend more due to the future less evaluability. It will also

impact the economy and declines the GDP whilst enhancing unemployment.

3. Research Plan

For this task, I will study the unemployment rate, inflation rate and GDP of United

States. I will utilize the data from World Bank website. I will also study the data in a time

period of 1989 to 2019. The trends will be measured in the three said variables to check their

correlation and regression based models. The regression analysis will include two simple
linear regression models with independent variable of GDP and dependent variables

including inflation rate and unemployment rate.

Reference
https://financialnerd.com/three-pillars-economy-inflation-gdp-unemployment/
Annotated Bibliography

Article One

Mandel, C. and P. Liebens (2019). "The Relationship between GDP and Unemployment Rate

in the US." International Journal of Business and Social Science 10(4).

Summary

GDP and the unemployment rate are the two major figures those are determining the

country’s prosperity degree. The higher rate of the unemployment presents that there is less

efficiency utilization of the labor availability. This paper provides the correlation analysis

between the United States’ unemployment rate and the GDP (Mandel & Liebens, 2019) 1. It

is measured for the 50 years’ time period. Through the use of the econometric model in this

study, the multiple regression analysis is used for the hypothesis testing that is the decline of

the GDP rate via slowing the economic growth leading to the enhanced rate of the

unemployment. It is also supporting the higher level of the literature review for the future

studies. The continuous negative correlation is presented in the literature analyzed by them

between the unemployment and the GDP in the last 50 years of the USA.

Role in this paper

This paper will provide the basis for the literature review in section unemployment

rate and the United States’ GDP. The literature review will be minimized for the research and

the analysis will also be highlighted as a root cause for the next stages of the working. The

companies can also work for the analysis and the long run development but there is the need

1
Mandel, C. and P. Liebens (2019). "The Relationship between GDP and Unemployment Rate
in the US." International Journal of Business and Social Science 10(4).
for the continuous development at the economic level. The studies must be presented as the

core analysis for the techniques and the management of the country level resources. The

terms and conditions will also be managed in the comprehensive ways to tackle the issues.

The literature will also analyze the learning and the literature analysis in the next stages. The

studies will also emphasize over the role of the models and their impact. The control over the

changes and their challenges will be mentioned as the critical rules for the changes in

economy. The problems can be mentioned as the tools for the technical and the non-technical

changes.

Article Two

Podgórska, J. and M. Leśniowska-Gontarz (2016). "Analysis of the Relationship between

Unemployment and GDP in Poland and Spain in the Years 2002–2015." Barometr

Regionalny 14(3): 59-67.

Summary

The objective of this study is the analysis of the correlation existing between the rate

of the growth and the unemployment rate in the countries of Europe. Only the two European

countries are selected for this study including the Spain and Poland. The hypothesis will also

be put forward as the verified and the analyzed in the utilization of the data from the public

database of the OECD for the time period of 2002 to 2015 (Podgórska & Leśniowska-

Gontarz, 2016) 2. The first of the hypothesis of this study assumes that there is the existence

of the link between the changes and the unemployment rates in the gross domestic products.

The second of the hypothesis shows that for the 2-3 percentages existing in the outcomes for

the decline of the incline of the real GDP in link to the potential gross domestic products, the

rate of the unemployment can decline or incline by the 1% in the survey of these two
2
Podgórska, J. and M. Leśniowska-Gontarz (2016). "Analysis of the Relationship between
Unemployment and GDP in Poland and Spain in the Years 2002–2015." Barometr Regionalny
14(3): 59-67.
countries. The empirical system also verifies the first hypothesis in the positive ways and

similarly, the second hypothesis can also falsify for the two countries mentioned in this study.

It has provided the future studies emphasis over the control of the economy through the

policies development and the creative problem management.

Role in the literature

This study will provide the emphasis over the studies and the literature analysis. The

study is supporting the correlation existing between the gross domestic product and the

unemployment rate. It will mention the result part of this study to include the minimization of

the issues and identifying the role of the particular years and the factors. The years of the

changes will not be same as well as the study is not including the literature of the USA. This

will identify the link of the long run development and the challenges for the USA based

studies. This will also be helpful in the management of the active and the passive learning for

the literature of this topic of the GDP and unemployment. This will also provide the rules and

regulations for the unemployment rates so that the USA will employ the changes those are

also critical forms and their considerations in the long run.

Article Three

Andrei, D. B., D. Vasile and E. Adrian (2009). "The correlation between unemployment and

real GDP growth. A study case on Romania." ANALELE UNIVERSITĂŢII DIN ORADEA:

316.

Summary

The sustainable rate for the real growth of GDP is one of the main ways for the

promotion of the enhancing living standards. From the point of the view of neoclassical, there

are the underlying factors those can affect the economic growth. These factors are

encompassing the population growth, savings and the progress in the technology.
Unemployment can also be very crucial for the attainment of the sustainable growth of the

economy. It the unemployment rate is less than the natural level of the rate, there will be

higher range of the inflation rate generation as an outcome(Andrei, Vasile, & Adrian, 2009)3.

This paper also emphasized over the relationship between the unemployment and the GDP

growth as mentioned by the law of Okun. The empirical assessment provides that the

enhancement of the one percent for the unemployment is linked with the decline of the

decrease of almost ½ percentage point for the GDP growth points.

Role in the study

This article is also emphasizing over the right methods of the selection and

presentation of data. The comprehensive approaches are manageable in the long run so that

there can be the right modes of the changes and their selection. The range of the development

is also critically emphasizing over the structure and the strategies mentioned for the literature.

The studies will also work as an outcome to the real situation. The companies are also

working as a tool to consider the long run and short run emphasis. The problems are also

manageable whereas the studies will provide the emphasis over the role of Okun law and

their presentation as an effect of the GDP on unemployment rate.

Article Four

Ayyoub, M., I. Chaudhry and F. Farooq (2011). "Does Inflation Affect Economic Growth?

The case of Pakistan." Pakistan Journal of Social Sciences (PJSS) 31(1).

Summary

This study analyzes the effect of the inflation on GDP as an indicator of the economic

growth. This study utilized the Pakistan as the country of analysis. The major aim of this

3
Andrei, D. B., D. Vasile and E. Adrian (2009). "The correlation between unemployment and
real GDP growth. A study case on Romania." ANALELE UNIVERSITĂŢII DIN ORADEA:
316.
study is the examination of the existence of the inflation growth link with the Pakistani

economy and the empirical assessment of the impact of inflation on the economic changes in

the Pakistan. The study also investigates that there is existence of the encouragement of the

economic growth in the uniform ways or not. The different levels show the different

behaviors from the economy of the Pakistan (Ayyoub, Chaudhry, & Farooq, 2011) 4. It is also

investigates as there is the annual time series data available in the two time periods ranging

1972 to the 1973 and 2009 to 2010. These two time periods are taken and analyzed for the

employment of the method of OLS. The significant and negative inflation growth link has

been assessed existing in the Pakistani economy. The study mentioned that there are the

enhancing management of the resources and their implications can be managed in the next

phases. The controls will also be supplied as the managing bodies. The changes are also

manageable and the resources can articulate the level of standards for the long run. Such

issues can be managed in the critical forms.

Role in the study

This study is effective for the literature based analysis of the study. It will also support

in the literature development and assessing that there can be more than one methods of the

application for the research and development. The unemployment, inflation rate and the GDP

can be different for the various models and their employment will also be critically analyzed.

The research models will also be employed in the long run to assess the resources and their

implementation. This study is based upon the Pakistani economy but the research will be

performed in the United States so it will mention the difference between the two economies

and the economic factors of the two countries. The problems are also varying with the

passage of time. The structure is dependent upon the critical resources.

4
Ayyoub, M., I. Chaudhry and F. Farooq (2011). "Does Inflation Affect Economic Growth?
The case of Pakistan." Pakistan Journal of Social Sciences (PJSS) 31(1).
Article Five

Singh, R. (2018). "Impact of GDP and inflation on unemployment rate:" A study of Indian

Economy in 2011–2018”." International Journal of Management, IT and Engineering 8(3):

329-340.

Summary

This study has analyzed the effect of the inflation on the rate of unemployment and

the gross domestic product as the indicator of the economy. It is the longitudinal level of the

study and includes a time period of range 2011 to 2018. The data has been considered for the

secondary sources of the research in this study. The study also found that the inflation rate

has the significant effects on the unemployment and the gross domestic product of the India.

The correlation of the said variables is negative. The correlation of the inflation and the

unemployment is marked as the positive at 0.477 (Singh, 2018) 5. It is also significant at the

10% level. The correlation between the unemployment rate and GDP has also been assessed

as insignificant with the value of range 0.196. It is also concluded that the inflation has the

role for which there is the influence and higher range of the effects but for the unemployment

and the GDP it is the insignificant level with the macroeconomics in the Indian economy.

Role in the Study

This paper has the significant role in the emphasis as well as designing of the

literature review. The study will support in the research question one stating the role of

inflation on the gross domestic product. The country mentioned in this study is the India. The

economy of India is different whereas the USA has a different scenario for the development

and operations. The study will act as the strategic element of the studies. The problems and

their impacts will also be considered as the long run development and their emphasis. It will

5
Singh, R. (2018). "Impact of GDP and inflation on unemployment rate:" A study of Indian Economy
in 2011–2018”." International Journal of Management, IT and Engineering 8(3): 329-340.
provide the emphasis over the changes in the long run environment so that the USA will

provide the policies and the implications in management and academic environment.

Hypothesis
This part of the study is mainly stating the hypothesis on the grounds of theory related

to this study.

Theory
For the relationship of GDP and inflation rate, the negative relation is expected in the

light of demand theory. Demand theory states the economic principle pertained to the link

between the consumer demand for services and goods and their market prices(Podgórska &

Leśniowska-Gontarz, 2016; Singh, 2018). Demand theory forms the base of the demand

curve which pertained to the desire of consumers for amounts of available goods (Andrei,

Vasile, & Adrian, 2009). Link of the GDP and unemployment states in light of Okun’s law.

It mentions that the unemployment and losses of country production are linked. The gap

version provides that for every 1% enhancement in the unemployment rate, the GDP of

country will be roughly 2% less than the already existing or the potential GDP (Ayyoub,

Chaudhry, & Farooq, 2011; Mandel & Liebens, 2019).

Hypothesis

Following are the two hypothesis.

1. There is no negative relationship between GDP and inflation rate.

2. There is no negative relationship between GDP and unemployment rate.

Theories state that the economy is affected by the inflation rate and the unemployment

rate. These changes are also made available for economic and other trends. The challenges

are effectively substituting the reasons for effective standards and their management in long

run.
Methodology

Data sources for the USA unemployment rate, inflation rate and GDP is World Bank.

The summary statistics is here for the GDP, Unemployment rate and GDP.

Summary Statistics

This is summary statistics for this data. The mean shows the average value of the data

existing. The median and the mode are also mean and most recurring values of data. Standard

deviation shows the variation from mean. The minimum and maximum values shows the two

values from the data. Following table shows the values for three variables for USA.

GDP   Inflation Rate   Unemploymen  

t Rate

Mean 13.06290087 Mean 2.52490847 Mean 5.910936

Standard 0.031300728 Standard Error 0.214543965 Standard Error 0.282689
Error
Median 13.08684828 Median 2.607441592 Median 5.65
Mode 13.31269227 Mode #N/A Mode #N/A
Standard 0.174275077 Standard 1.19453024 Standard 1.573943
Deviation Deviation Deviation
Sample 0.030371803 Sample 1.426902495 Sample 2.477297
Variance Variance Variance
Kurtosis -1.16820547 Kurtosis 1.052471771 Kurtosis 0.080288
Skewness - Skewness 0.012975361 Skewness 0.86386
0.289289219
Range 0.561291516 Range 5.753502706 Range 5.764
Minimum 12.75140075 Minimum - Minimum 3.869
0.355546266
Maximum 13.31269227 Maximum 5.39795644 Maximum 9.633
Sum 404.9499269 Sum 78.27216256 Sum 183.239
Count 31 Count 31 Count 31

Statistical Analysis/Regression

Following are the scatter diagrams.

 GDP
12

10

0
0 2 4 6 8 10 12

GDP trend is shown in this scatter diagram.

Inflation Rate
6

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
-1

Inflation trend is shown in this scatter diagram. It is mentioned as the zig zag.
 Unemployment Rate
12

10

0
0 2 4 6 8 10 12

Unemployment rate trend is shown in this scatter diagram. It provides the increase in

the last 10 years more than ever.

GDP Vs Inflation
16
14
12
10
8
6
4
2
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
-2

GDP Inflation Rate

GDP vs. Inflation chart shows that the GDP is stable as compared to the variation of

the inflation.
 Inflation Rate Vs. Unemployment
12

10

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
-2

Inflation Rate Unemployment Rate

Inflation rate Vs. Unemployment shows that the inflation rate is higher at 22 nd year

whereas the unemployment is highest in the 1990s.

Regression Analysis

Regression models are two. In the first model, the effect of GDP is measured on

inflation rate.

SUMMARY OUTPUT

Regression Statistics
0.59181537
Multiple R 9
0.35024544
R Square 3
Adjusted R 0.32784011
Square 4
0.14288004
Standard Error 5
Observations 31

ANOVA
Significanc
  df SS MS F eF
0.31912756 0.31912756 15.6322379 0.00045351
Regression 1 4 4 7 9
0.59202651 0.02041470
Residual 29 4 7
 0.91115407
Total 30 8      

Standard
  Coefficients Error t Stat P-value
13.2809076 0.06081822 218.370536 3.39967E-
Intercept 6 2 4 48
- -
0.08634245 0.02183804 3.95376250 0.00045351
Inflation Rate 3 7 8 9

Second model checks the effect of GDP on unemployment rate.

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.108236
R Square 0.011715
Adjusted R Square -0.02236
Standard Error 0.176213
Observations 31

ANOVA
Significance
  df SS MS F F
Regression 1 0.010674 0.010674 0.343763 0.562202
Residual 29 0.90048 0.031051
Total 30 0.911154      

Standard
  Coefficients Error t Stat P-value
Intercept 13.13374 0.124898 105.1557 5.28E-39
Unemployment
Rate -0.01198 0.02044 -0.58631 0.562202