Economics 2550 Assignment 1

Retrieval and Analysis of Economic Data

Dmitry Kosarev 201200805
(N.B the last number of my student number is 5, so my assigned province is
Ontario)

Contents
Q13
Q2..16
Q3..20
Q4..26
Q5..30
Q6..32
Appendices..33

Question 1
1.1 Unemployment rates in Canada and the 10 provinces between 2006-2012
Year
2006
2007
2008
2009
2010
2011
2012

Canada
6.3
6.0
6.1
8.3
8.0
7.5
7.3

NL
14.7
13.5
13.2
15.5
14.4
12.7
12.5

PEI
11
10.3
10.8
12.0
11.2
11.3
11.3

NS
7.9
7.9
7.7
9.2
9.3
8.8
9.0

NB
8.7
7.5
8.5
8.8
9.3
9.5
10.2

QC
8.1
7.2
7.2
8.5
8.0
7.8
7.8

ON
6.3
6.4
6.5
9.0
8.7
7.8
7.8

MB
4.3
4.4
4.2
5.2
5.4
5.4
5.3

SK
4.7
4.2
4.1
4.8
5.2
5.0
4.7

AB
3.4
3.5
3.6
6.6
6.5
5.5
4.6

BC
4.8
4.3
4.6
7.7
7.6
7.5
6.7

Unemployment rates between 2006-12

16
15
14
13

Percentage rate

12
11

Canada

10

NL
PEI

NS
NB

QC

ON
6

MB

SK
AB

BC

3
2
1
0
2006

2007

2008

2009

2010

2011

2012

Year

The table above as well as the table on which is based on gives an indication that provinces in the same
geographic area have similar unemployment rates. For instance the prairies, (Alberta, Manitoba and
Saskatchewan) have the lowest rates of unemployment amongst the provinces whilst the Atlantic provinces
(Newfoundland and Labrador, Nova Scotia, New Brunswick, Prince Edward Island) have some of the highest
with Newfoundland and Labrador having the highest by a significant margin. Ontario, British Columbia and
Quebec have unemployment rates similar to each other although only Ontario and Quebec are direct
geographical neighbors. This suggests that the provinces can be divided into these geographic groups for
closer analysis as they may share similar economic problems and fundamentals besides just unemployment.
However as British Columbias economy is based on primary industries just like Albertas, Saskatchewans
and Manitobas it is better to group BC with those provinces rather than Ontario or Quebec. Both Quebec
and Ontario have a similarly diversified economy with little focus on resource extraction and a much larger
reliance on manufacturing and service industries making it more sensible to group them together for
subsequent data analysis.
Overall across the period unemployment in Canada rose which is generally true for most provinces as result
of the economic downturn that started in 2008. Before then the rates were heading downwards slightly for
most provinces. Newfoundland and Labrador has proven the exception with its unemployment rate having
decreased in the time period specified. The significant fluctuations however may be pointing to the
economic instability that an economy reliant on its resource industries faces even as overall this reliance may
had a net positive effect on the unemployment rate in NLs case. This can also be argued about Alberta which
also had a significant shift in its unemployment rate, first a dramatic increase and then a steady decrease
almost back to the initial rate in 2006. In comparison Ontario, despite having a diversified economy with a
much smaller reliance on primary industries, has experienced a similar increase in unemployment rate
without the corresponding decrease in the latter years of the period observed.
NL
10.2
13.0
4.6

PEI
8.5
11.2
4.1

NS
6.7
8.7
3.1

NB
7.1
8.9
3.3

QC
5.9
7.8
2.8

ON
6.0
7.7
2.5

MB
4.0
5.0
1.7

SK
3.6
4.7
1.6

AB
3.8
4.6
1.3

BC
5.2
6.4
1.9

Average, Median and Standard

Deviation of the unemployment rates
Percentage rate

Average
Median
Standard
deviation

Canada
5.6
7.2
2.4

14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0

Average
Median
Standard deviation

Provinces

The above conclusions can be supported by the data in the table above. The Atlantic provinces clearly have
the highest average rates of unemployment in the time range. The data also supports the conclusion that ON
and QC have very similar unemployment rates with the Prairie provinces and BC having average
unemployment rates below the national average justifying their classification into one group for subsequent
analysis. However the standard deviation results are harder to explain. ON has twice the standard deviation
of QC, while AB and BC have four and five times respectively the standard deviation of SK. These
discrepancies suggest that even within the three geographic groups and despite seemingly similar data,
significant differences in the economic structure and problems between the provinces are present.

1.2 Inflation rates in Canada and across the provinces between 1981 and 2012
CPI Index Values 1981-2012
Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

Canada
49.5
54.9
58.1
60.6
63.0
65.6
68.5
71.2
74.8
78.4
82.8
84.0
85.6
85.7
87.6
88.9
90.4
91.3
92.9
95.4
97.8
100
102.8
104.7
107
109.1
111.5
114.1
114.4
116.5
119.9
121.7

NL
53.1
58.5
62.4
65.2
67.9
69.9
71.9
73.5
76.2
79.5
84.4
85.3
86.7
87.8
89
90.4
92.3
92.5
93.8
96.6
97.7
100
102.9
104.8
107.6
109.5
111.1
114.3
114.6
117.4
121.4
123.9

PEI
52.7
57.8
60.7
63.3
65.6
67
69.4
71.9
74.6
78.4
84.3
85
86.6
86.4
87.8
89.4
90.5
90.1
91.2
94.9
97.4
100
103.5
105.8
109.1
111.6
113.6
117.5
117.3
119.5
123
125.5

NS
50.8
55.6
59.1
61.7
64.5
66.5
68.8
71.2
74.4
78.2
82.9
83.5
84.5
85.5
86.6
88.2
90
90.6
92.1
95.3
97.1
100
103.4
105.3
108.2
110.4
112.5
115.9
115.7
118.2
122.7
125.1

NB
50.9
55.6
59.3
62.3
65.2
67.5
69.4
71.8
75.2
78.7
83.8
84.3
85.4
85.9
87.2
88.5
90.1
90.6
92.1
95.1
96.8
100
103.4
104.9
107.4
109.2
111.3
113.2
113.5
115.9
120
122

QC
50.2
56
59.1
61.5
64.2
67.3
70.2
72.8
75.9
79.2
85
86.6
87.7
86.6
88.1
89.5
90.8
92.1
93.5
95.8
98
100
102.5
104.5
106.9
108.7
110.4
112.7
113.4
114.8
118.3
120.8

ON
48.2
53.3
56.6
59.4
61.8
64.6
67.8
71
75.1
78.7
82.4
83.2
84.7
84.7
86.8
88.2
89.8
90.6
92.4
95.1
98
100
102.7
104.6
106.9
108.8
110.8
113.3
113.7
116.5
120.1
121.8

MB
49
53.3
56.8
58.9
61.4
64.1
66.8
69.6
72.9
76.2
80.1
81.2
83.4
84.6
86.9
88.8
90.6
91.8
93.6
95.9
98.5
100
101.8
103.8
106.6
108.7
110.9
113.4
114.1
115
118.4
120.3

SK
49.5
54
57.4
59.8
62
63.7
66.8
69.8
72.9
76
80
80.8
83.3
84.8
86.4
88.1
89.2
90.4
92
94.4
97.2
100
102.3
104.6
106.9
109.1
112.2
115.9
117.1
118.7
122
123.9

AB
49.8
55.4
58.3
59.8
61.6
63.7
66.3
68.1
70.9
75
79.4
80.6
81.4
82.6
84.5
86.4
88.1
89.2
91.4
94.5
96.7
100
104.4
105.9
108.1
112.3
117.9
121.6
121.5
122.7
125.7
127.1

BC
51.8
57.3
60.4
62.8
64.8
66.7
68.7
71.2
74.4
78.4
82.6
84.8
87.8
89.5
91.6
92.4
93.1
93.4
94.4
96.1
97.7
100
102.2
104.2
106.3
108.1
110
112.3
112.3
113.8
116.5
117.8

The above table shows the Consumer Price Index for all items which is an indicator of the changes in
consumer prices experienced by the target population and its variation between 1981 and 2012. This data
uses 2002 as the base year meaning that its CPI is assigned the base value of 100. Using the CPI it is
relatively easy to calculate the yearly inflation. The detailed equations, sample calculations are listed in
Appendix B. The tables and descriptive graphs of the inflation rate data are on the following page.

Year

Inflation
rate
Canada

Inflation
rate
NL

Inflation
rate
PEI

Inflation
rate
NS

1981

10.91

10.17

9.68

9.45

1982

5.83

6.67

5.02

6.29

1983

4.30

4.49

4.28

4.4

1984

3.96

4.14

3.63

1985

4.13

2.95

1986

4.42

1987

Inflation rate
NB
9.23

Inflation
rate
QC

Inflation
rate
ON

Inflation rate
MB

Inflation
rate
SK

Inflation
rate
AB

Inflation
rate
BC

11.55

10.58

8.78

9.09

11.24

10.62

5.54

6.19

6.57

6.30

5.23

5.41

5.06

4.06

4.95

3.7

4.18

2.57

3.97

4.54

4.65

4.39

4.04

4.24

3.68

3.01

3.18

2.13

3.10

3.53

4.83

4.53

4.40

2.74

3.41

2.93

2.86

3.58

3.46

2.81

4.31

4.95

4.21

4.87

4.08

3.00

3.94

2.23

3.60

3.49

3.46

3.70

4.72

4.19

4.49

2.71

3.64

1988

5.06

3.67

3.76

4.49

4.74

4.26

5.77

4.74

4.44

4.11

4.49

1989

4.81

4.33

5.09

5.11

4.65

4.35

4.79

4.53

4.25

5.78

5.38

5.61

6.16

7.53

6.01

6.48

7.32

4.70

5.20

5.26

5.87

5.36

1991

1.45

1.07

0.83

0.72

0.60

1.88

0.97

1.37

1.00

1.51

2.66

1992

1.90

1.64

1.88

1.20

1.30

1.27

1.80

2.71

3.09

0.99

3.54

1993

0.12

1.27

-0.23

1.18

0.59

-1.25

0.00

1.44

1.80

1.47

1.94

1994

2.22

1.37

1.62

1.29

1.51

1.73

2.48

2.72

1.89

2.30

2.35

1995

1.48

1.57

1.82

1.85

1.49

1.59

1.61

2.19

1.97

2.25

0.87

1996

1.69

2.10

1.23

2.04

1.81

1.45

1.81

2.03

1.25

1.97

0.76

1997

1.00

0.22

-0.44

0.67

0.55

1.43

0.89

1.32

1.35

1.25

0.32

1998

1.75

1.41

1.22

1.66

1.66

1.52

1.99

1.96

1.77

2.47

1.07

1999

2.69

2.99

4.06

3.47

3.26

2.46

2.92

2.46

2.61

3.39

1.80

2000

2.52

1.14

2.63

1.89

1.79

2.30

3.05

2.71

2.97

2.33

1.66

2001

2.25

2.35

2.67

2.99

3.31

2.04

2.04

1.52

2.88

3.41

2.35

2002

2.80

2.90

3.50

3.40

3.40

2.50

2.70

1.80

2.30

4.40

2.20

2003

1.85

1.85

2.22

1.84

1.45

1.95

1.85

1.96

2.25

1.44

1.96

2004

2.2

2.67

3.12

2.75

2.38

2.30

2.20

2.70

2.20

2.08

2.02

2005

1.96

1.77

2.29

2.03

1.68

1.68

1.78

1.97

2.06

3.89

1.69

2006

2.20

1.46

1.79

1.90

1.92

1.56

1.84

2.02

2.84

4.99

1.76

2007

2.33

2.88

3.43

3.02

1.71

2.08

2.26

2.25

3.3

3.14

2.09

2008

0.26

0.26

-0.17

-0.17

0.27

0.62

0.35

0.62

1.04

-0.08

0.00

2009

1.84

2.44

1.88

2.16

2.11

1.23

2.46

0.79

1.37

0.99

1.34

2010

2.92

3.41

2.93

3.81

3.54

3.05

3.09

2.96

2.78

2.44

2.37

2011

1.5

2.06

2.03

1.96

1.67

2.11

1.42

1.60

1.56

1.11

1.12

Average

2.96

2.79

2.86

2.97

2.88

2.90

3.06

2.95

3.02

3.09

2.70

Median

2.25

2.35

2.63

2.75

2.11

2.11

2.46

2.46

2.74

2.57

2.20

Standard
Deviation

1.50

1.38

1.50

1.45

1.58

1.64

1.59

1.35

1.27

1.47

1.40

6.65

1990

Inflation rate of Atlantic provinces and Canada

Canada
NL
PEI
NS

Percentage rate

11.5
11
10.5
10
9.5
9
8.5
8
7.5
7
6.5
6
5.5
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
-0.5
-1
-1.5

NB

2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
Year
3.5

Percentage rate

3
2.5
2
Average
1.5

Median

Standard Deviation

0.5
0
Canada

NL

PEI

NS

NB

Geographic area

This shows that while the inflation rates of the Atlantic provinces in Canada generally follow Canadas as a
whole, occasionally there are serious divergences such as the period between 1985 and 1988. PEI stands out
in this regard since it shows considerable divergence from both Canadas and of other Atlantic provinces in
its inflation rate in multiple occasions such as 1986, 1991, 1998 and 2000. However all the provinces have
similar averages and standard deviations.

Inflation rates of QC and ON compared to Canada

14
12

Percentage rate

10
8
Canada
6

QC
ON

4
2

1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

0
-2

Year

3.5

Percentage rates

3
2.5
2
Average
1.5

Median

Standard Deviation

0.5
0
Canada

QC

ON

Geographic area

Both inflation rates in QC and ON stay close to the national rate however when they diverge they are on
opposite sides of the national rate as displayed by 1991, 1994 and to a smaller extent by 2000-1 and 20067. This can be explained by the fact that ON and QC are the two largest economies in Canada so they
moderate each others impact on the national inflation rate. The averages and standard deviations are
similar, close to both the national rates as well as to those of the Atlantic provinces.

Inflation rates of the prairie provinces and BC

compared to Canada
12
10

Percentage rate

8
Canada
6

AB
MB

BC
SK

-2

1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

Year

3.5

Percentage rate

3
2.5
2
Average
1.5

Median

Standard Deviation

0.5
0
Canada

MB

SK

AB

BC

Geographic area

Again the provinces follow the national trend with some exceptions. An important one is AB in 1983, 1987,
2002 and 2005-6. This also applies to BC to a lesser extent in 2001. 1993 is an interesting data point as all
provinces in this group had a noticeable and similar divergence with the national rate. On average however
BC has the lowest inflation rate with a significant difference to other provinces and the national rate while SK
has the lowest deviation.
Overall the 3 preceding graphs show that the provinces with larger economies, such as ON, AB and QC often
have an inflation rate that is different to the national rate. Smaller Atlantic provinces also exhibit these
differentials. An interesting point to note is that these do not usually occur within the same year. However
on average all provinces have inflation rates and standard deviation rates that converge on the average
national rate. This shows that any provincial divergences are only temporary and do not have a significant
impact on the overall convergence.
10

1.3 Nominal GDP for Canada and the 10 provinces between 1981 and 2010
(dollars x 1,000,000)
The following table and graphs present the nominal GDP of Canada and the 10 provinces over time in their 3
groups as well as their share historically of Canadas total nominal GDP.
Year

Canada

NL

PEI

NS

NB

QC

ON

MB

SK

AB

BC

1982

379859

5609

1153

9186

7052

85218

138741

14053

15008

56803

45024

1983

411386

5988

1356

10364

8046

91832

154682

15106

15969

58397

47477

1984

449582

6373

1389

11437

8818

100292

172842

16998

17031

62282

49840

1985

485714

6647

1445

12393

9373

107391

189125

18536

17926

66785

53540

1986

512541

7244

1630

13403

10462

117156

208460

19260

17772

57961

56547

1987

558949

7763

1737

14432

11572

128438

230778

20385

18195

60070

62515

1988

613094

8467

1911

15294

12438

140845

256441

22016

18850

63936

69408

1989

657728

8995

2059

16306

13128

148431

278791

23370

19977

67377

75582

1990

679921

9219

2169

16993

13458

153330

282834

24193

21227

73257

79350

1991

685367

9587

2255

17650

13647

155156

283094

24029

21393

72892

81849

1992

700480

9549

2345

18094

14038

158362

286493

24434

21220

74936

87242

1993

727184

9771

2471

18343

14693

162229

293405

24590

22928

81179

94077

1994

770873

10264

2521

18667

15286

170478

311096

25958

24480

88041

100512

1995

810426

10652

2662

19296

16380

177331

329317

26966

26425

92036

105670

1996

836864

10417

2823

19512

16626

180526

338173

28434

28944

98634

108865

1997

882733

10533

2800

20368

16845

188424

359353

29751

29157

107048

114383

1998

914973

11176

2981

21401

17633

196258

377897

30972

29550

107439

115641

1999

982441

12184

3159

23059

19041

210809

409020

31966

30778

117080

120921

2000

1076577

13922

3366

24658

20085

224928

440759

34057

33828

144789

131333

2001

1108048

14179

3431

25909

20684

231624

453701

35157

33127

151274

133514

2002

1152905

16457

3701

27082

21169

241448

477763

36559

34343

150594

138193

2003

1213175

18119

3798

28851

22366

250752

493081

37451

36653

170113

145642

2004

1290906

19407

3983

29853

23672

262761

516106

39748

40796

189743

157675

2005

1373845

21960

4096

31199

24716

272049

537383

41681

43996

219810

169664

2006

1450405

26064

4315

31644

25847

282505

560576

45173

45604

238886

182251

2007

1529589

29249

4543

33031

27044

295928

583946

48920

50863

255787

192117

2008

1603418

30785

4687

34519

27499

304479

587055

51575

65649

288700

199441

2009

1528985

24762

4778

34774

27920

304861

581635

51518

57995

240697

191863

2010

1624608

28192

5010

36352

29448

319348

612494

54257

63557

263537

203147

11

Nominal GDP in miilions of dollars

Nominal GDP of Canada and the Atlantic provinces

1600000
1400000
1200000
1000000

Canada

800000

NL

600000

NS
NB

400000

PEI

200000
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Year

As is evident from this graph the nominal GDP of the Atlantic provinces is miniscule compared to the total
nominal GDP of Canada. A more useful analysis would be the variation of each provinces share of the
national nominal GDP. This not only allows a comparison over time of what the importance of each
provinces economy to the national total, but also to see the relative economic growth, making it easy to see
provincial economic growth relative to the national rate of economic growth. If it is increasing, this means
that the province is growing faster than Canada overall, while a decrease shows a negative gap between
national and provincial growth rate.

Individual provinces' proportion of national nominal

GDP expressed as a percentage
3.00

2.00
NL Proportion

1.50

PEI Proportion
1.00

NS Proportion

0.50

NB Proportion

0.00
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Percentage rate

2.50

Year

12

The above graph and the table to the left give a

Average
clear picture. While NLs and NS nominal growth
Median
rate fluctuated the most, PEI stayed almost
Standard
constant based on the standard deviation values.
variation
Overall NS has the largest economy out of the 4
while PEI has the smallest. However NS share decreased while NLs increased. NBs and PEI retained a
constant share throughout the period.
NL
1.44
1.39
0.14

1800000

PEI
0.32
0.31
0.010

NS
2.40
2.38
0.12

NB
1.92
1.93
0.082

Nominal GDP of Canada, ON and QC

Nominal GDP x millions of dollars

1600000
1400000
1200000
1000000
800000
600000
400000
200000

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

0
Year

This undoubtedly indicates that the both ONs and QCs economies make up an important part of total national
nominal GDP rate.

QC and ON percentage rate of national nominal GDP

45.0
40.0
30.0
25.0
20.0

QC Proportion

15.0

ON Proportion

10.0
5.0
0.0
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Percentage rate

35.0

Year

13

QC
Average 21.4
Median 21.6
Standard 1.02
variation

ON
40.0
40.6
1.37

The above graph and left table shows that both ON and QC contribute
significantly to the national nominal GDP with QCs share decreasing over
the given period while ONs rising and then falling with the starting and
ending shares almost equal with changes being gradual rather than sudden
as indicated by the standard deviation values which are small compared to

the mean.

National nominal GDP, Canada, Prairie provinces + BC

1800000

1400000
1200000
Canada

1000000

MB

800000

SK

600000

AB

400000

BC

200000
0
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Nominal GDP x 1,000,000 dollars

1600000

Year

14

Proportions of the prairie provinces + BC of the total

nominal GDP
20.0
18.0
Percentage rate

16.0
14.0
AB Proportion

12.0
10.0

BC Proportion

8.0
6.0

MB Proportion

4.0
2.0

SK Proportion
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

0.0

Year

Overall this shows that even though previous data

has shown similarity between the provincial
economies in this group both BC and AB contribute a
Average 3.40
3.34
13.1
12.1
significantly larger proportion to the national GDP.
Median 3.37
3.20
13.1
12.2
This suggests that they are also much larger in size
Standard 0.189
0.273
1.91
0.523
variation
compared to the other economies in this group.
However while BCs data has a small standard deviation, showing a stability in proportion and size, ABs data
indicates that its economy has undergone significant boom and bust cycles. The large standard deviation
value displays that the proportion AB contributes has fluctuated significantly over the time period of the
data, rising substantially when AB was experiencing a boom and also shrinking substantially when BC was
experiencing a bust. This may be related to the provinces significant dependence on the oil sands industry
and its cyclical economic nature.
MB

SK

AB

BC

15

Question 2
a) Real GDP data for Canada and Ontario
Yea r

Na tiona l CPI

Ca na da nomi na l GDP Rea l GDP

Ontari o Nomi na l GDP

Ontari o Rea l GDP

1982

54.9

379859

691911

138741

252716

1983

58.1

411386

708065

154682

266234

1984

60.6

449582

741884

172842

285218

1985

63

485714

770975

189125

300198

1986

65.6

512541

781313

208460

317774

1987

68.5

558949

815984

230778

336902

1988

71.2

613094

861087

256441

360170

1989

74.8

657728

879316

278791

372715

1990

78.4

679921

867246

282834

360758

1991

82.8

685367

827738

283094

341901

1992

84

700480

833905

286493

341063

1993

85.6

727184

849514

293405

342763

1994

85.7

770873

899502

311096

363006

1995

87.6

810426

925144

329317

375933

1996

88.9

836864

941354

338173

380397

1997

90.4

882733

976475

359353

397514

1998

91.3

914973

1002161

377897

413907

1999

92.9

982441

1057525

409020

440280

2000

95.4

1076577

1128487

440759

462012

2001

97.8

1108048

1132973

453701

463907

2002

100

1152905

1152905

477763

477763

2003

102.8

1213175

1180131

493081

479651

2004

104.7

1290906

1232957

516106

492938

2005

107

1373845

1283967

537383

502227

2006

109.1

1450405

1329427

560576

513819

2007

111.5

1529589

1371829

583946

523718

2008

114.1

1603418

1405274

587055

514509

2009

114.4

1528985

1336525

581635

508422

2010

116.5

1624608

1394513

612494

525746

*All GDP data is to be multiplied by 1,000,000 dollars.

16

Canada and Ontario Real GDP between 1982-2010

1600000
Real GDP x 1,000,000 dollars

1400000
1200000
1000000
800000
Canada Real GDP

600000

Ontario Real GDP

400000
200000
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Year

Real GDP of Canada and Ontario between 1982-2010

1600000

GDP x 1,000,000 dollars

1400000
1200000
1000000
800000
Canada Real GDP

600000

Ontario Real GDP

400000
200000
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Year

The data and graphs overall show that during 1982-1990 the rate of change of Ontario real GDP was very
similar to the national rate. After that, Ontarios real GDP became less responsive to the rate of change of
Canadas real GDP, rising and decreasing at a slower rate. This is shown by the slope of the curves, which is
steeper for Canada compared to Ontario. This trend becomes more pronounced after 2000 with the 2008
recession causing both economies to decrease and then rebound, with Ontarios however decreasing and
rebounding at a significantly smaller magnitude. A graph of the growth rate of Canada and Ontario over the
same time frame would show this more clearly.
17

b)
Year
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Average
Median
Standard
deviation
Q1
Q3
Min
Max

Rate of real GDP growth

for Canada, %
2.3
4.8
3.9
1.3
4.4
5.5
2.1
-1.4
-4.6
0.7
1.9
5.9
2.9
1.8
3.7
2.6
5.5
6.7
0.4
1.8
2.4
4.5
4.1
3.5
3.2
2.4
-4.9
4.3
2.6
2.8
1.9

Rate of real GDP growth

for Ontario, %
5.3
7.1
5.3
5.9
6.0
6.9
3.5
-3.2
-5.2
-0.2
0.5
5.9
3.6
1.2
4.5
4.1
6.4
4.9
0.4
3.0
0.4
2.8
1.9
2.3
1.9
-1.8
-1.2
3.4
2.7
3.2
2.5

1.8
4.3
-4.9
6.7

0.5
5.3
-5.2
7.1

18

Rate of real GDP growth, Canada and ON, 19822009

15

5
Rate of real GDP growth for
Ontario, %

0
-5

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Percentage rate

10

Rate of real GDP growth for

Canada, %

-10
-15

Time

The above graph delves deeper into the details of how the economic growth in Ontario diverged from the
economic growth of Canada. Between 1982 and 1990, Ontario either grew faster than Canada or contracted
at a larger rate. This trend was then ambiguous at best between 1991 and 2001 where first Canada
rebounded more strongly from the 1989-90 recession, followed by years of faster Ontario growth during
1996-98 and 2001. From 2001 Canada has unequivocally had larger absolute rates of change, both positive
between 2001 and 2007 and negative in 2008. However a look at the table above the graph shows that the
average rate of increase is almost identical between Canada and Ontario. However both the median and
standard deviation are larger for Ontario, suggesting that it has experienced more turbulence in its economic
growth.

Percentage rate of change of real GDP

10
8
6
4
2
0
Rate of real GDP growth for Canada

Rate of real GDP growth for Ontario

-2
-4
-6

This is also confirmed by the box-and-whisker plot. Although the range between the maximum and minimum
values is similar in magnitude, Canada has a smaller spread of values in its interquartile range than Ontario.
Even though its upper quartile is lower than Ontarios its lower quartile is higher also hinting at a more lower
but more stable and growth rate without such pronounced booms and busts like Ontario.
19

Question 3
3. To fit a line the method of least squares will be used.
For this question the equations will be listed here instead of the appendix as the question asks for the
equations specifically.
yt = a + bt

3.1.1 Canadas Real GDP for 1982-2009

Year

Real GDP

(Yi-Ybar)

ti-tbar
-13.5

(titbar)^2
182.25

(Yi-Ybar)(titbar)
4152246.11

1982

691911

-307573.8

1983

708065

-291419.8

-12.5

156.25

3642747.32

1984

741884

-257600.8

-11.5

132.25

2962409.04

1985

770975

-228509.8

-10.5

110.25

2399352.75

1986

781313

-218171.8

-9.5

90.25

2072631.96

1987

815984

-183500.8

-8.5

72.25

1559756.68

1988

861087

-138397.8

-7.5

56.25

1037983.39

1989

879316

-120168.8

-6.5

42.25

781097.11

1990

867246

-132238.8

-5.5

30.25

727313.32

1991

827738

-171746.8

-4.5

20.25

772860.54

1992

833905

-165579.8

-3.5

12.25

579529.25

1993

849514

603951.5

-2.5

6.25

-1509878.75

1994

899502

-99982.8

-1.5

2.25

149974.18

1995

925144

-74340.8

-0.5

0.25

37170.39

1996

941354

-58130.8

0.5

0.25

-29065.39

1997

976475

-23009.8

1.5

2.25

-34514.68

1998

1002161

2676.2

2.5

6.25

6690.54

1999

1057525

58040.2

3.5

12.25

203140.75

2000

1128487

129002.2

4.5

20.25

580509.96

2001

1132973

133488.2

5.5

30.25

734185.18

2002

1152905

153420.2

6.5

42.25

997231.39

2003

1180131

180646.2

7.5

56.25

1354846.61

2004

1232957

233472.2

8.5

72.25

1984513.82

2005

1283967

284482.2

9.5

90.25

2702581.04

2006

1329427

329942.2

10.5

110.25

3464393.25

2007

1371829

372344.2

11.5

132.25

4281958.46

2008

1405274

405789.2

12.5

156.25

5072365.18

2009

1336525

337040.2

13.5

182.25

4550042.89

20

Slope
Intercept
Y bar
t-bar
Sum of (ti-tbar)^2

25790
625525
999484.8
13.5
1827

Sum of (Yi-Ybar)(ti-tbar)

47118878

Graph of linear fit

Linear fit of Canada's Real GDP

1400000

y = 25790x + 625525

1200000
1000000
800000
600000
400000
200000
0
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Real GDP x 1,000,000 dollars

1600000

Year

21

3.1.2 Ontarios real GDP for 1982-2009

Year
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Real
GDP
252716
266234
285218
300198
317774
336902
360170
372715
360758
341901
341063
342763
363006
375933
380397
397514
413907
440280
462012
463907
477763
479651
492938
502227
513819
523718
514509
508422

(Yi-Ybar)

ti-tbar

-146870
-133352
-114368
-99388.3
-81812.3
-62684.3
-39416.3
-26871.3
-38828.3
-57685.3
-58523.3
-56823.3
-36580.3
-23653.3
-19189.3
-2072.3
14320.7
40693.7
62425.7
64320.7
78176.7
80064.7
93351.7
102640.7
114232.7
124131.7
114922.7
108835.7

-13.5
-12.5
-11.5
-10.5
-9.5
-8.5
-7.5
-6.5
-5.5
-4.5
-3.5
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5
4.5
5.5
6.5
7.5
8.5
9.5
10.5
11.5
12.5
13.5

(titbar)^2
182.25
156.25
132.25
110.25
90.25
72.25
56.25
42.25
30.25
20.25
12.25
6.25
2.25
0.25
0.25
2.25
6.25
12.25
20.25
30.25
42.25
56.25
72.25
90.25
110.25
132.25
156.25
182.25

(Yi-Ybar)(ti-tbar)
1982749
1666904
1315235
1043577
777216.9
532816.6
295622.3
174663.5
213555.7
259583.9
204831.6
142058.3
54870.45
11826.65
-9594.65
-3108.45
35801.75
142428
280915.7
353763.9
508148.6
600485.3
793489.5
975086.7
1199443
1427515
1436534
1469282

Slope
Intercept
Y bar
t-bar
Sum of (ti-tbar)^2

9790
257636
399586
13.5
1827

Sum of (Yi-Ybar)(ti-tbar)

17885701

22

Graph of linear fit for Ontarios rate of unemployment

600000
y = 9789.7x + 257636

500000
400000
300000
200000
100000
0

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Real GDP x 1,000,000 dollars

Real GDP linear fit

Year

Comparing the linear trends for the real GDP of Canada and Ontario yields some similarities. Both trend up
meaning that over the whole period real GDP has increased nationally and in Ontario. However the trend for
Canada has both a higher slope and intercept, showing that Canadas GDP increased at a higher rate and that
its starting real GDP at the beginning of the period (ie 1982) was higher than Ontarios.

23

3.2.1 Canadian unemployment rate for 2006-12

Year
2006
2007
2008
2009
2010
2011
2012
2012

Rate %
6.3
6
6.1
8.3
8
7.5
7.3
7.3

Time
0
1
2
3
4
5
6
7

Yi-Ybar
-0.8
-1.1
-1
1.2
0.9
0.4
0.2
0.2

ti-tbar
-3.5
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5

Slope
Intercept
Y bar
t-bar
Sum of (ti-tbar)^2

0.2821
5.9429
7.07
3
29.75

Sum of (Yi-Ybar)(ti-tbar)

(ti-tbar)^2
12.25
6.25
2.25
0.25
0.25
2.25
6.25
12.25

(yi-ybar)*(ti-tbar)
2.8
2.75
1.5
-0.6
0.45
0.6
0.5
0.7

Linear fit of Canadas rate of unemployment

Rate of unemployment %

Rate of unemployment linear fit

9
8
7
6
5
4
3
2
1
0

y = 0.2821x + 5.9429

2006

2007

2008

2009

2010

2011

2012

Year

24

3.2.2 Ontarios rate of unemployment

Year

Rate %

Time

Yi-Ybar

ti-tbar

2006
2007
2008
2009
2010
2011
2012
2012

6.3
6.4
6.5
9
8.7
7.8
7.8
7.8

0
1
2
3
4
5
6
7

-0.8
-0.7
-0.6
1.9
1.6
0.7
0.7
0.7

-3.5
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5

Slope
Intercept
Y bar
t-bar
Sum of (ti-tbar)^2

0.3393
6.1429
7.5
3
29.75

Sum of (Yi-Ybar)(ti-tbar)

8.1

(titbar)^2
12.25
6.25
2.25
0.25
0.25
2.25
6.25
12.25

(yi-ybar)*(titbar)
2.8
1.75
0.9
-0.95
0.8
1.05
1.75
2.45

Linear fit of Ontarios rate of unemployment

Linear fit of Ontario's rate of

unemployment
Unemployment, %

10

y = 0.3393x + 6.1429

8
6
4
2
0
2006

2007

2008

2009

2010

2011

2012

Year

Comparing the unemployment rate linear trends for Canada and Ontario yields some similarities. Both trend
upwards, showing that the rate of unemployment has increased overall over the period for both. Ontarios
has a higher slope meaning its rate has increased at a higher rate than the national rate and so is its intercept
signifying that Ontarios unemployment rate at the start of the period (ie 2006) was higher than the national
rate.

25

Question 4
4.1.1 Output gaps for Canadas Real GDP

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

625525
651315.3
677105.6
702895.9
728686.2
754476.5
780266.8
806057.1
831847.4
857637.7
883427.999
909218.299
935008.599
960798.899
986589.199
1012379.5
1038169.8
1063960.1
1089750.4
1115540.7
1141331
1167121.3
1192911.6
1218701.9
1244492.2
1270282.5
1296072.8
1321863.1

Output
gap
10.61%
8.71%
9.57%
9.69%
7.22%
8.15%
10.36%
9.09%
4.26%
-3.49%
-5.61%
-6.57%
-3.80%
-3.71%
-4.59%
-3.55%
-3.47%
-0.60%
3.55%
1.56%
1.01%
1.11%
3.36%
5.36%
6.82%
7.99%
8.43%
1.11%

Canada Output Gap

12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
-2.00%

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Yp

Output Gap

Year

-4.00%
-6.00%
-8.00%

Year

26

4.1.2 Output gaps for Ontarios Real GDP

1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

257636
267425.7
277215.3
287005
296794.6
306584.3
316373.9
326163.6
335953.2
345742.9
355532.6
365322.2
375111.9
384901.5
394691.2
404480.8
414270.5
424060.1
433849.8
443639.5
453429.1
463218.8
473008.4
482798.1
492587.7
502377.4
512167
521956.7

Output
Gap
-1.91%
-0.45%
2.89%
4.60%
7.07%
9.89%
13.84%
14.27%
7.38%
-1.11%
-4.07%
-6.18%
-3.23%
-2.33%
-3.62%
-1.72%
-0.09%
3.82%
6.49%
4.57%
5.37%
3.55%
4.21%
4.02%
4.31%
4.25%
0.46%
-2.59%

Ontario Output Gap

20.00%

15.00%

10.00%

5.00%

0.00%
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Yp

Output Gap

Year

-5.00%

-10.00%

Year

4.1.3 Conclusions
Comparing Ontarios and Canadas output gaps yields several resemblances . At the beginning of the period
in 1982, Ontario started at a slightly positive output gap while Canada had a significantly positive output.
However during 1982-1989 both had a positive output gap with Ontarios rising rapidly to a percentage
higher than Canadas while Canadas hovered around 10%, decreasing slightly and then bouncing back. At a
such a positive gap both Ontario and Canada are overusing their resources and capital, such as by making
their workers work overtime. This is often a sign of economic growth at a higher rate than the natural rate,
pointing at an economic boom. However at such a large output gap, domestic supply is unable to meet
demand and the number of imports tends to increase. Inflationary pressures are also likely to arise as
peoples incomes rise and so does their demand for goods. If businesses are unable to expand production

27

sufficiently quickly, then more and more money will be chasing the same amount of goods, causing increases
in prices.
After 1989 this trend of positive output gaps was reversed dramatically. 1990 saw a significant decrease in
the percentage rate of the positive output gap for both Canada and Ontario with both halving in size. Ontario
experienced a negative output gap between 1991 and 1997, peaking at -6.30 in 1993. Canada saw a longer
period of negative output gaps, between 1991 and 1998, with a peak of -6.58 in 1993 as well. Both Canada
and Ontario saw a consistent increase in the negative output gap until 1993 with 1994-96 showing little
change. Ontario then rebounded to a real GDP almost equal to its potential GDP in 1998 while Canada
reached this point in 1999. What this shows this that during this period Canada experienced a period where
resources were underused. This suggests that there was decreasing demand which could be a sign of a
recession. Recessions occur when economic growth becomes negative or where Real GDP decreases over a
period of time. This seems to be the case for this period. Canada took one more year than Ontario to reach
the level of its potential real GDP, indicating that Ontario started to experience another economic boom one
year before many other provinces, even though Ontario experienced a downturn for the same amount of
time as Canada, ie around 1991-1993.
At the year 2000 both Canada and Ontario saw a spike in their output gap, with Ontarios being almost
double that of Canadas (6.50% vs 3.55%). However while Ontarios gap trended along the 5% mark between
2000 and 2007, Canadas dropped consistently between 2000-3 and then increased continuously until 2008.
This could reflect that Ontario emerged relatively unscathed from the dot-com bubble and its burst while
Canada as a whole was impacted more severely. Canada rebounded very strongly from this and between
2005-8 its positive output gap was higher than Ontarios. However while Ontarios and Canadas output gap
fell to almost zero, this took two years for Ontario, while Canadas plummeted rapidly from above 8%. This
shows that the 2008 recession impacted Ontario earlier than Canada but with a smaller impact, perhaps
reflecting the bust other provincial economies were experiencing, which is usually more pronounced in
resource dependent economies such as Albertas and NLs.

4.2.1 Unemployment gaps in Canada between 2006 and 2012.

Ep

2006
2007
2008
2009
2010
2011
2012

5.9
6.2
6.5
6.8
7.1
7.4
7.6

Unemployment
Gap
6.01%
-3.61%
-6.26%
22.25%
13.13%
1.99%
-4.39%

Canada Unemployment Gap

25.00%
20.00%
Unemployment Gap

Year

15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%

2006

2007

2008

2009

2010

2011

2012

Year

28

4.2.2 Unemployment gaps in Ontario between 2006 and 2012.

Ep

2006
2007
2008
2009
2010
2011
2012

6.14
6.48
6.82
7.16
7.50
7.84
8.18

Unemployment
Gap
2.6%
-1.3%
-4.7%
25.7%
16.0%
-0.5%
-4.6%

Ontario Unemployment Gap

30.0%
25.0%
Unemployment Gap

Year

20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%

2006

2007

2008

2009

2010

2011

2012

Year

4.2.3 Conclusions
The unemployment gaps for both Ontario and Canada are remarkably similar. This could be explained by the
fact that Ontario contains approximately 40% of Canadas total population and so can be expect to
contribute around 40% of the total number of unemployed. This will impact the national unemployment rate
quite significantly . The overall shape of the graph is almost identical with some of the points being higher or
lower. Overall between 2006-8 the unemployment rate trends close to the natural trend. There is a massive
spike in 2009, where Ontario and Canada experienced unemployment 25.7% and 22.25% higher respectively
than the natural rate. This may be the result of large lay-offs in the wake of the 2008-9 recession. During
2010-12 the unemployment gap surged back towards the natural rate. Conclusions overall may not be as
reliable as the natural trend is derived from fewer data points unlike the Real GDP and output gap data.

29

Question 5
5.1 Graph of Canadas unemployment rate and output gaps vs time

2006
2007
2008
2009

Canada
Canada
unemployment Output
rate
Gap
6.3%
4.31%
6.0%
4.25%
6.1%
0.46%
8.3%
-2.59%

Canada Unemployemnt Rate and

Output Gap 2006-2009
10.00%
Percentage rate

Year

8.00%
6.00%

Canada
Unemployment rate

4.00%

Canada Output Gap

2.00%
0.00%
2006

2007

2008

2009

Year

5.2 Graph of Ontarios unemployment rate and output gaps vs time

2006
2007
2008
2009

Ontario
unemployment
rate
6.30%
6.40%
6.50%
9.00%

Ontario
Output
Gap
4.31%
4.25%
0.46%
-2.59%

Ontario Unemployemnt Rate and

Output Gap 2006-2009
10.00
8.00
Percentage rate

Year

6.00
Ontario
unemployment rate

4.00
2.00

Ontario output Gap

0.00
-2.00
-4.00

2006

2007

2008

2009

Year

5.3 Conclusions
Both graphs somewhat similar shapes across the 4 years. Certain conclusions can be made although these
are without a high degree of confidence since only 4 coinciding data points for the unemployment rate and
output gap rate have been used. Ontarios graph shows that in the immediate pre-recession years, 2006 and
2007 both rates converged. 2008 saw a drastic decrease in the output gap while unemployment rate saw
minimal change. 2009 saw a similar change in the output gap as in the previous year while the
unemployment rate increased at a similar rate. Overall this makes it seem that inversely proportional
although not perfectly so. 2009 clearly shows this relationship while 2008 suggests that a change in the rate
of the output gap affects the unemployment rate but that a period of time is necessary for the
unemployment rate to change. This makes economic sense. A decrease in the output gap suggests that the
GDP growth is slowing or even decreasing. If it is truly decreasing then, fewer products will be made and
30

fewer resources such as labor are needed to produce them. Since labor is a factor of production that is the
easiest to reduce the use of in the short term, they would be the first factor of production of which the usage
would decrease. This would naturally lead to higher unemployment rates. Some time is needed to elapse for
firms to realize that there is less demand for their products and to decide to reduce their labor costs by
laying off workers. This also makes sense considering the context of the years used for the graphs. In 20082009 there indeed was a decrease in GDP due to the global recession which led to a significant increase in
unemployment. The data from the Canada graph does not completely support these conclusions however it
does confirm the inverse relationship present. More data would be needed to confirm this relationship
however.

31

Question 6
Okuns Law states there is a relationship between output and unemployment gaps. As the unemployment
gap increases by 1% the output gap will increase by %.
Canada
Canada
Year
unemployment Output
Gap
gap
2006
6.01% 6.82%
2007
-3.61% 7.99%
2008
6.26% 8.43%
2009
22.25% 1.11%
Sxx
1.42%
Sxy
0.22%
Sx
7.73%
Sy
6.09%
Slope
-29.77%
Intercept 8.39%

Year

Ontario
Ontario
unemployment Output
gap
Gap

2006
2007
2008
2009
Sxx
Sxy
Sx
Sy
Slope
Intercept

2.60%

4.31%

-1.30%

4.25%

-4.70%

0.46%

25.70%

-2.59%

1.72%
-0.16%
5.58%
1.61%
-17.50%
2.58%

%Output gap = x %Cyclical unemployment where cyclical is unemployment above the natural rate of
unemployment. In other words cyclical unemployment is the unemployment gap.

where:
Y is actual output
Y* is potential output
u is actual unemployment
is the natural rate of unemployment
is a constant derived from regression to show the link between deviations from natural output and natural
unemployment.
The equation is in a linear structure with yi = % output gap and xi = unemployment gap. A simple linear
regression model has the form yi = 0 + ixi but the 0 is not readily apparent from Okuns Law.
Equation for Canada: Output gap = -30%(unemployment rate) + 8.4%
Equation for Ontario: Output gap = -17.5%(unemployment rate) + 2.6%
From the equations it is possible to see that Ontarios output rate is less sensitive to changes in
unemployment gaps and by extension to changes in unemployment than Canadas.

32

Appendices
Appendix A - CANSIM Series Labels
Table 109-5324 Unemployment rate, Canada, provinces and health regions (2013 boundaries), annual
(percent), 2006-2012
Table 384-0013 Selected economic indicators, provincial economic accounts, annual (dollars unless
otherwise noted), 1981-2010
Table 326-0021 Consumer Price Index (CPI), 2009 basket, annual (2002=100), 1981-2012
Appendix B Equations and Calculations
B.1 Inflation Calculation
A year is taken as the base year. It is represented by A while the immediately following year is B. The CPI
value from the second year or year B is subtracted from the CPI of the base year or A. This value is then
divided by the base year CPI value with the decimal then multiplied by 100 to give the percentage increase.
((B - A)/A)*100
Sample Calculation:
Year
1981
1982

Canada
CPI
49.5
54.9

Inflation rate for 1981: ((54.9-49.5)/49.5) * 100 = 10.91% It is 1981 since the CPI data reported is typically
reported for the start of every year, allowing the calculation of the inflation rate for the year that has just
ended.
B.2
Arithmetic Mean
Simply take the sum of all the values in a data series and then divide by the number of data points.

Sample calculation:
1/29(1.48+1.46+1.42+1.37+1.41+1.39+1.38+1.37+1.36+1.40+1.36+1.34+1.33+1.31+1.24+1.19+1.22+1.24+1.2
9+1.28+1.43+1.49+1.50+1.60+1.80++1.91+1.92+1.62+1.74) = 1.44
B.3 Standard Deviation
The standard deviation is found by taking the square root of the average of the squared differences
of the values from their average value.
33

Sample calculation will use data from sample calculation for arithmetic mean.
sqrt((1.48-1.44)2+(1.46-1.44)2+(1.421.37)2+.(1.92-1.44)2+(1.62-1.44)2+(1.74-1.44)2)/29) = 0.144
B.4 Calculating Real GDP using Nominal GDP and deflator (implicit price index)
Real GDP for a given year, in relation to a "base" year, is computed by multiplying the nominal GDP for a
given year by the ratio of the GDP price deflator in the base year to the GDP price deflator for the given year.
The GDP deflator is an economic metric that converts output measured at current prices into constant-dollar
GDP. This includes prices for business and government goods and services, as well as those purchased by
consumers. This calculation shows how much a change in the base year's GDP relies upon changes in the
price level. The GDP deflator used for this is the CPI index where 2002 prices are set to 100 which takes the
role of the base year.
Sample calculation
Year

1982

Implicit
price
index
54.9

Nominal
GDP
(millions of
dollars)
379859

Real GDP: Nominal GDP * (100/60.4)

$379859 * (100/ 54.9) = $691911

B.5 Calculating Quartiles

First the data must be ordered from smallest value to largest.
Qn = n/100 * number of data points.
-4.9
-4.6
-1.4
0.4
0.7
1.3
1.8
1.8
1.9
2.1
2.3

Q1 = 0.25 * 11 = 2.75 so use 3rd value in ordered array as Q1 which is -1.4.

Q3 = 0.75*11 = 8.25 so use 8th value in ordered array as Q3 which is 1.8.

B.6 Calculating the output gap

First the linear trend for a graph must be used to calculate the potential output or unemployment at a time.
The actual value at that time is then subtracted from that potential value to produce a difference that is
called an output gap.
34

Sample Calculation
Equation for potential:
Yp=1115573.89+33353.75t
At time =1 , Yp = 1115574 but the actual value is 1120146.
Output gap = ((1120146-1115574)/1115574) * 100 = 0.410%

B.7 Calculating correlation coefficients

sx = arithmetic mean of x
sy = arithmetic mean of y
sxx = Sum (xi2) / n where n = number of observations
sxy = sum(xi*yi) / n
b1 = the estimated slope
= (sxy-sxsy)/(sxx-(sx)^2)
Intercept = (sxxsy sxysx)/(sxx-(sx)^2)

35