The Probability of an Economic Decline in the Year 2008

question 75

Short Answer

The probability of an economic decline in the year 2008 is 0.23. There is a probability of 0.64 that we will elect a republican president in the year 2008. If we elect a republican president, there is a 0.35 probability of an economic decline. Let "D" represent the event of an economic decline, and "R" represent the event of election of a Republican president.
a. Are "R" and "D" independent events?
b. What is the probability of a Republican president and economic decline in the year 2008?
c. If we experience an economic decline in the year 2008, what is the probability that there will a Republican president?
d. What is the probability of economic decline or a Republican president in the year 2008? Hint: You want to find PD ∪ R).

---

Definitions:

GDP Price Index

An economic metric that measures changes in the price level of all goods and services included in Gross Domestic Product.

Nominal Gross Domestic Product

a measure of a country's economic output (all goods and services produced) valued at current market prices, without adjusting for inflation.

Consumer Price Index

is a measure that examines the weighted average of prices of a basket of consumer goods and services, often used to assess inflation.

Annual Rate

Refers to the yearly interest rate or growth rate applied to investments, loans, or any financial product that calculates earnings or payments over a year.