calculate the misery index values using the data below, to exactly identify the

Question

calculate the misery index values using the data below, to exactly identify the year in which the index value was the highest. Explain what that value means.

Frequency: Annual observation_date UNRATE CPIAUCSL_PC1 1970-01-01 5.0 5.9 1971-01-01 6.0 4.2 1972-01-01 5.6 3.3 1973-01-01 4.9 6.3 1974-01-01 5.6 11.0 1975-01-01 8.5 9.1 1976-01-01 7.7 5.8 1977-01-01 7.1 6.5 1978-01-01 6.1 7.6 1979-01-01 5.9 11.3 1980-01-01 7.2 13.5 1981-01-01 7.6 10.4 1982-01-01 9.7 6.2 1983-01-01 9.6 3.2 1984-01-01 7.5 4.4 1985-01-01 7.2 3.5 1986-01-01 7.0 1.9 1987-01-01 6.2 3.6 1988-01-01 5.5 4.1 1989-01-01 5.3 4.8 1990-01-01 5.6 5.4 1991-01-01 6.9 4.2 1992-01-01 7.5 3.0 1993-01-01 6.9 3.0 1994-01-01 6.1 2.6 1995-01-01 5.6 2.8 1996-01-01 5.4 2.9 1997-01-01 4.9 2.3 1998-01-01 4.5 1.5 1999-01-01 4.2 2.2 2000-01-01 4.0 3.4 2001-01-01 4.7 2.8 2002-01-01 5.8 1.6 2003-01-01 6.0 2.3 2004-01-01 5.5 2.7 2005-01-01 5.1 3.4 2006-01-01 4.6 3.2 2007-01-01 4.6 2.9 2008-01-01 5.8 3.8 2009-01-01 9.3 -0.3 2010-01-01 9.6 1.6 2011-01-01 8.9 3.1 2012-01-01 8.1 2.1 2013-01-01 7.4 1.5 2014-01-01 #N/A #N/A

Explanation / Answer

Misery Index is simply the sum of Unemployment rate (UNRATE) and inflation (CPIACUSL_PC1).

As seen in the table below, the highest misery index value was 20.7% as on 1st Jan 1980. Usually higher unemployment rate leads to lower inflation. However, when the misery index is at its peak, it means that both unemployment rate and inflation are high and it could harm the economy and may cause social unrest in the country.

observation_date UNRATE CPIAUCSL_PC1 Misery Index = UNRATE + CPI 01-01-70 5 5.9 10.9 01-01-71 6 4.2 10.2 01-01-72 5.6 3.3 8.9 01-01-73 4.9 6.3 11.2 01-01-74 5.6 11 16.6 01-01-75 8.5 9.1 17.6 01-01-76 7.7 5.8 13.5 01-01-77 7.1 6.5 13.6 01-01-78 6.1 7.6 13.7 01-01-79 5.9 11.3 17.2 01-01-80 7.2 13.5 20.7 01-01-81 7.6 10.4 18 01-01-82 9.7 6.2 15.9 01-01-83 9.6 3.2 12.8 01-01-84 7.5 4.4 11.9 01-01-85 7.2 3.5 10.7 01-01-86 7 1.9 8.9 01-01-87 6.2 3.6 9.8 01-01-88 5.5 4.1 9.6 01-01-89 5.3 4.8 10.1 01-01-90 5.6 5.4 11 01-01-91 6.9 4.2 11.1 01-01-92 7.5 3 10.5 01-01-93 6.9 3 9.9 01-01-94 6.1 2.6 8.7 01-01-95 5.6 2.8 8.4 01-01-96 5.4 2.9 8.3 01-01-97 4.9 2.3 7.2 01-01-98 4.5 1.5 6 01-01-99 4.2 2.2 6.4 01-01-00 4 3.4 7.4 01-01-01 4.7 2.8 7.5 01-01-02 5.8 1.6 7.4 01-01-03 6 2.3 8.3 01-01-04 5.5 2.7 8.2 01-01-05 5.1 3.4 8.5 01-01-06 4.6 3.2 7.8 01-01-07 4.6 2.9 7.5 01-01-08 5.8 3.8 9.6 01-01-09 9.3 -0.3 9 01-01-10 9.6 1.6 11.2 01-01-11 8.9 3.1 12 01-01-12 8.1 2.1 10.2 01-01-13 7.4 1.5 8.9 01-01-14 #N/A #N/A

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