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.

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:

Period	Budget Deficit	debt held by public	debt held by federal reserve	change in debt held by public	change in debt held by federal reserve	changes in debt held by public and federal reserve
1980-01-01	73830	699384	120800.0	-	-	-
1981-01-01	78968	790060	123575.0	90676	2775.0	93450.5
1982-01-01	127977	910039	131825.0	119979	8250.0	128228.8
1983-01-01	207802	1111561	146425.0	201522	14600.0	216122.3
1984-01-01	185367	1290387	154900.0	178826	8475.0	187301.0
1985-01-01	212308	1494839	170275.0	204453	15375.0	219827.5
1986-01-01	221227	1718347	192700.0	223508	22425.0	245932.5
1987-01-01	149730	1889399	210800.0	171052	18100.0	189152.3
1988-01-01	155178	2039260	228175.0	149861	17375.0	167235.8
1989-01-01	152639	2175360	227075.0	136100	-1100.0	134999.8
1990-01-01	221036	2418033	229700.0	242674	2625.0	245298.5
1991-01-01	269238	2704994	253400.0	286961	23700.0	310661.3
1992-01-01	290321	3018001	279350.0	313007	25950.0	338956.5
1993-01-01	255051	3279209	315750.0	261208	36400.0	297607.8
1994-01-01	203186	3474962	350600.0	195753	34850.0	230603.0
1995-01-01	163952	3645419	370550.0	170457	19950.0	190407.3
1996-01-01	107431	3776614	383950.0	131195	13400.0	144594.8
1997-01-01	21884	3835440	412125.0	58827	28175.0	87001.8
1998-01-01	69270	3803038	442775.0	-32403	30650.0	-1752.5
1999-01-01	125610	3715711	479400.0	-87327	36625.0	-50701.8
2000-01-01	236241	3508911	507425.0	-206800	28025.0	-178775.0
2001-01-01	128236	3360257	536200.0	-148654	28775.0	-119879.3
2002-01-01	157758	3526798	599925.0	166541	63725.0	230266.0
2003-01-01	377585	3873789	654100.0	346992	54175.0	401166.5
2004-01-01	412727	4276280	694900.0	402491	40800.0	443290.5
2005-01-01	318346	4604003	730650.0	327723	35750.0	363473.3
2006-01-01	248181	4853668	768175.0	249665	37525.0	287189.5
2007-01-01	160701	5045710	772900.0	192043	4725.0	196767.8
2008-01-01	458553	5701491	505625.0	655781	-267275.0	388505.8
2009-01-01	1412688	7345425	673650.0	1643934	168025.0	1811958.5
2010-01-01	1294373	8839123	846725.0	1493699	173075.0	1666773.8
2011-01-01	1299599	9996999	1572000.0	1157875	725275.0	1883150.3
2012-01-01	1086955	11196392	1658100.0	1199393	86100.0	1285493.3
2013-01-01	679542	12041300	2003425.0	844908	345325.0	1190233.0
2014-01-01	484600	12755962	2720300.0	714663	716875.0	1431537.5
2015-01-01	438496	13247211	2802050.0	491249	81750.0	572998.5
2016-01-01	584651	14121037	2827050.0	873826	25000.0	898826.0
2017-01-01	665372	14562572	2862225.0	441535	35175.0	476710.3

Table (1)

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

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.

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:

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.

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:

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.