**1) **There are five variables of interest in the data set: FDI (Foreign Direct Investment), Inflation, Taxes, GDP (Gross domestic product) and population.

a) OECD countries are countries committed to democracy and the free market system. For a list of these countries google keywords “OECD Countries” or visit:

**http://www.oecd.org/countrieslist/0,3351,en_33873108_33844430_1_1_1_1_1,00.html**

Calculate summary statistics (mean and standard deviation) for OECD countries and non-OECD countries. Report results in a well organized table. Compare and comment on the differences found between OECD countries and non-OECD countries.

b) China has a GDP of 4.326 billion dollars while Luxemburg has a GDP of 54,260 million dollars. Which country has a better standard of living? Take GDP and divide it by each country’s population in order to obtain GDP per capita. Calculate the mean and standard deviation of GDP per capita for OECD countries and non-OECD countries. Comment on your findings while comparing the standard of living between these two sets of countries.

c) FDI is a dollar figure that quantifies the foreign investment in a country. If FDI is positive then foreign assets are flowing into the country. If FDI is negative, foreign assets are leaving the country. Do you expect a relationship between FDI and GDP per capita? Should FDI be higher or lower for countries with low standard of living? Calculate the correlation coefficient and estimate the regression line for GDP per capita and FDI for OECD countries and non-OECD countries separately. Explain the regression line in this context.

d) Use the model in c) to answer the following question. If Argentina is predicted to have a 5% growth rate of their GDP per capita for 2009, how much will FDI change in the country? Show all work.

e) What is the expected relationship between FDI and Taxes? Calculate the regression line between FDI and Taxes. Explain the model.

f) Compare the tax model and the GDP per capita model. Which of the two models is better at predicting FDI? Use the R^2 estimate, and the meaning of the slope and intercept in your explanation.

Subject | Mathematics |

Due By (Pacific Time) | 12/05/2012 12:00 pm |

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