This question is based on data from UK selected European Union countries, saved in an Excel file on Moodle. For each student who answers this question, you will be assigned three countries. Answer all three parts of this question:
a) For each country assigned to you, produce a line chart with two lines: unemployment, and GDP index . To what extent does the unemployment rate move in the opposite direction to GDP?
b) For each country assigned to you, produce a Phillips curve. In each of these three countries, to what extent does wage inflation seem inversely related to unemployment?
c) Explain why we would expect wage inflation to be related to GDP, using the ‘business cycle’ model. Do your answers to (a) and (b) confirm this expectation?
