Assignment I

Faculty of Arts Department of Economics CECN 600 Intermediate Macroeconomics - II Winter 2023, Section 3J0 Assignment I Due March 4, 2023 Student Name: Souphaylinh Xoumphonphackdy Student ID: 501096278 Professor: Dr. Hakan Toksoy

Question 1: Using Statistics Canada, obtain the annual data on savings and disposable income for Canada between 1999 and 2021. i) Personal saving as a percentage of the disposable income between 1999 and 2021 ii) According to the graph above, the saving rate is at its lowest rate of 1.1% in year 2007 and 2018. While in 2020, the saving rate is at its highest rate which spikes up to 11.0%. This incremental depicts that consumers are saving a larger percentage of their income rather than spending it. 0.0 2.0 4.0 6.0 8.0 10.0 12.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Personal Saving rate (%) Year Personal Saving as a percentage of disposable personal income Household Saving Rate (%)

Question 2: Using the World Bank Data obtain the annual data on the interest-rate spread and the economic growth for upper middle-income countries between 1996 and 2020. i) Plot of the interest-rate spread and the economic growth for upper middle-income countries between 1996 and 2020 is as follows: ii) The interest rate spread refers to the difference between the interest rate that a bank charges on loan to commercial banks and private sector customers and can have an impact on economic growth. However, other factors such as government policies, trade agreements, and global economic conditions, can also influence in determining the interest rates. In general, a higher interest rate spread can lead to slower economic growth due to higher spread can make it more expensive for businesses and consumers to borrow money, which can reduce investment and spending. Though, referring to the data obtained from World Bank Data and graph above implies that the relationship between the interest rate spread and economic growth is not always straightforward. The graph illustrates that when the interest rate spread is at its highest peak of 8.45% in year 2000, the GDP growth rate was not at its lowest trough. Conversely, the GDP growth in year 2000 had increased to the rate of 6.4% from previous year. Additionally, the GDP growth rate is more volatile and fluctuate while the interest rate spread is less volatile. In conclusion, changes in the interest rate spread could not be used solely in depicting the economic growth but plays a role in influencing the GDP growth. -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year Interest rate spread and the GDP growth for upper middle- income countries Average interest rate spread Average GDP growth (Annual %)