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The Most Important Economic Factors - Essay Example

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The paper "The Most Important Economic Factors" asserts that economic activities are largely influenced by economic factors such as the economy and economic growth, government policies, and consumers. These factors interact to determine business prospects for investment decisions…

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Subject: Macro & Microeconomics
Type: Essay
Level: Undergraduate
Pages: 1 (250 words)
Downloads: 2
Author: johnssantiago

Extract of sample "The Most Important Economic Factors"

The mean and standard deviation for percentage change in market indices and interest rates are summarized below,

Market indices

Interest rates

Mean

30.48

97.19

Standard deviation

14.56

251.75

The means indicate average values while standard deviation measures dispersion.

A test of hypothesis indicates that the percentage changes in market indices and interest rates were significant.

A scatter plot suggests the existence of a negative linear relationship between changes in the market index and interest rates with the existence of an outlier. Regression analysis however indicates a poor relationship between the variable with a low R squared value of 0.268, which means that the model only explains only 26.8 percent of the data. The regression coefficient is -0.0299 with a p value of 0.0277. The low p-value shows that the regression coefficient is significant.

Conclusion and recommendation
An increase in interest rates in a foreign country would therefore lead to a decrease in the value of foreign profits due to a low market index. The report recommends that national interest rates be considered when making global investment decisions. This is because a significant relationship exists between interest rates and market indices.

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