User:Manuel Franco Jr./Notebook/Physics Lab 307/2008/10/29

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=Economy Lab=

Objective

 * How to determine data quality and the analysis thereof.
 * Analyzing the GDP of the US.
 * Observing the CPI and Inflation Percent Changes

Bad Data
In determining good data from bad data, there are several easy ways to identify bad data. If the data does not source and lacks documentation, or their data lacks information, or if there is no information regarding the author(s), or their data format is difficult to understand, or "their presented data uses an obscure numbering system, and/or information contains conflicting or incorrect data," then it is classified as bad data.

Good Data
Common sense says that good data would be exactly the opposite of bad data. The data cites sources, everything is organized, has complete data, does not lack documentation, reasonable data interpretation, and/or data that flows. If the researcher/anaylsis has nothing to hide, then most of time he/she lists the author(s), writes their contact information, and the university or institution from which this was done. When data is gathered to the best ability of experimentalist, his/her equipment, and/or source that is good raw data, it's just a matter of identifying.

Conformance Data
There are cases were data is insufficient or misinterpreted, and it misleads many people. For example in the small world experiment by Stanley Milgram, were he and other researchers found the average path length for social networks in the US to be up to an average of about 6 people, this became accepted for many decades. (A.K.A. "6 degrees of separation.")  In recent years, a very bold physiologist named Judith S. Kleinfeld revisited the data gathered and analyzed by Stanley Milgram. She states in her famous article that, "Milgram’s original experiment... did not in a scientific sense support the popular, media interpretation that people in the United States, or indeed the world over, were connected by six degrees of separation." The data was not sufficient to prove that the idea of being connect on an average by 6 people was accurate, though it was accepted for many years. Be aware that there is misleading data. The only way to know is to do the research.

Background
GDP (Gross Domestic Product) is the value of all the goods and services produced in a country. There are two different ways to go about measuring the GDP. There is the nominal (unadjusted) GDP and the real (adjusted) GDP. The difference between the two is that the nominal GDP does not include inflation. It is "based on the prices that provailed when the output was produced." The real GDP includes inflation, and it "has been deflated or inflated to reflect changes in the price level." That is why it referred also as adjusted GDP. Economist calculate it by using what is called the GDP deflator.


 * $$\operatorname{GDP\ deflator} = \frac{\operatorname{Nominal\ GDP}}{\operatorname{Real\ GDP}}\times 100$$

Data and Graphs
The following data was obtained from BEA (Bureau of Economic Analysis.


 * 1) GDP Data Analysis

Info. regarding "chained 2000 dollar"
The following data plots the GDP of the US from 1980-2007 for the yearly data, and from 1980-2008. I could not find an exact definition of what the term "chained 2000 dollar" means, this is the closest interpretation of what that term means. This is according to the BTS (Bureau of Transportation Statistics), "The chained 2000 dollar values are computed by deflating the current net subsidy values by the GDP deflator for federal non-defense expenditures, which is obtained from the National Income and Product Account tables of the Bureau of Economic Analysis." .

Data Analysis and Comments
Based on both linear fit lines in both graphs, the GDP of the US has increased in the past 27 years, and it is still increasing cumulatively. So at first I believed from looking at the graph and the data that the US economy is doing great and is improving. Not to say it's doing bad, but after doing research I found that an increasing GDP does not mean a better economy, or even a stronger PPP (Purchasing Power Parity), assuming the growth is not "due to inflation or population increase." Instead an increasing GDP means a higher standard of living. But it is safe to say that the nation is providing goods and services. Not only in a large quantity, but in an increasing annually at a rate of $241.21 billions of current dollars and $390.49 chained 2000 dollars.

Background
When it comes to inflation, inflation is defined as "a rise in the general level of prices of goods and services in an economy over a period of time," in other words money deflation. The price of goods and services and inflation are inversely preportional. If price goes up, the When it comes to measuring inflation, there are two methods possible: CPI (Consumer Price Index) and PPI (Producer Price Index). The CPI is the measure of the average percent change of goods and services by households, or the rate of change in inflation. The PPI is the measure of the average change over time in the selling prices received by domestic producers.

Data and Graphs
All data for the CPI and percent changes were obtain from BLS (Bureau of Labor and Statistics).


 * 1) CPI Data Analysis
 * 2) Percentage Change

Info. concerning Index
In order to calculate the index referred in the graph, the BLS takes the average index value and set it equal to one hundred. They take the average from 1982 to 1984, and make it the current standard reference base period (1982-84=100). 

CPI Analysis
Based on the data the price of urban consumers is increasing yearly cumulatively. As I look at this data, I thinking what is refer to as this "value." The index is the average of the years 1982-1984, but that other value. What is it? It is the U.S. Consumer Price Index. For details on how these values are calculated and what they mean refer to United States CPI.

Percentage Change Analysis
From the percentage change data table and graph, there was a great drop in inflation during Reagan's term as well as during Bush Sr., but not as great as in Reagan's term. As for the other two administrations there was an slight increase in inflation. The annual data for Bush Jr. is incomplete due to the year not being complete. That one was left blank. So what do these increasing and decreasing percentages mean, and is this a good thing or a bad thing? From the research I've done on inflation, high percentage of inflation is not good thing (hyperinflation). That would mean that the value of money is worthless. At that point, the money would serve better as fuel to keep the fire going that's keeping me warm out in the street, than to go by gas, wood, etc. But the data is not that extreme, so we're in the safe zone. Unlike the GDP, inflation does in fact reduce the purchasing power of money (PPP). One disadvantage in the rise of inflation is that it hurts our ability to exchange money with foreign nations. So when the percentage in inflation dropped this strengthened the value of the $. 

Lab Summary
Finance/Economy Lab Summary

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