How to Use Excel in Economicsby Shane Hall
Excel, the spreadsheet program that is part of Microsoft's popular Office software package, is a favored tool for managing, analyzing and reporting economic data. With its user-friendly features, including chart wizard and data analysis capacity, Excel is a popular medium in many Principles of Economics courses for introducing students to basic data analysis. Many data sets exist in Excel-ready formats for students to get hands-on experience applying economic theories and concepts.
Import your economic data into an Excel spreadsheet. If your data are already in Excel, you need only open the file to display the data in a spreadsheet. Economic data may also be in tabular form in a Word document or perhaps in a PDF document. In the case of a Word table, you can cut and paste the data from Word into a blank Excel spreadsheet. If your data are in a PDF document, you will have to enter them by hand into a spreadsheet.
Create a visual display of your data with the help of the Excel chart wizard. Clicking the "Insert" menu and selecting "Chart" will open the chart wizard, which gives you an array of chart options to select. Popular charts in economic analysis include pie charts, bar charts, line graphs and scatterplots. Pie charts provide an effective way to display budget data, while bar charts are effective for comparing frequencies. Economists use line charts to depict changes over time in a variable of interest, such as unemployment rates, gross domestic product or stock prices. Meanwhile, a scatterplot provides a visual display of data points. Economists often use scatterplots as part of a regression analysis (discussed in Step 4).
Select the type of chart you want the chart wizard to create. Each chart option gives you a number of visual options. After selecting one, the chart wizard will ask you to specify the range of data in your spreadsheet that you want summarized by the chart. You can specify the range simply by clicking and dragging across the cells and columns of data you want included. When you are finished, simply click "Finish," at which time Excel will create and display the finished chart.
Activate the Data Analysis feature in Excel to take your economic analysis further. Click the "Tools" menu and choose "Add-ins." Excel will then display a set of available add-ins. Select "Analysis ToolPak" and click OK, which will add the Data Analysis option to your Tools menu.
Select an analysis procedure from the available options in the Data Analysis option in your Tools menu. Popular statistical procedures in economics include t-tests, Analysis of Variance (ANOVA), and regression analysis. The t-test compares the means of two variables to assess whether the differences are statistically significant. ANOVA takes this a step further by comparing the means of more than two groups. Economists use regression to predict the extent to which one or more independent variables affect the variation in an outcome, or dependent variable. For example, economists could use a regression equation to estimate the effects of age, education, ethnicity, gender, work experience and sector of employment (public vs. private) on average wages.
After selecting an analysis procedure, Excel will lead you step-by-step through choosing the range of data to analyze, similar to the chart wizard.
- The click-and-drag feature in Excel for specifying data to be analyzed necessitates that the variables you want to analyze be located adjacent to each other in your Excel spreadsheet. This may require you to physically cut and paste data from one column to another to position the data for analysis.