Empirical studies prove.

The Dickey-Fuller test was applied to both variables to detect if these variables were stationary or non-stationary. Both variables proved to be non-stationary; therefore, our regression tests were applied to the Second differences. Since the unemployment rate and interest rate in percentages, and GDP is presented in trillions of dollars, we regressed second differences of logarithms of GDP on Second differences of logarithms of unemployment rates adn interest rate to standardize the scales.

Table 1 show the output from unit root test Augmented Dickey-Fuller (ADF) Variables Probability Result Constant 1.00 Non-Stationary Unemployment Rate 0.0439 Stationary Interest Rate 0.2424 Non-Stationary Government Expenditure 1.00 Non-Stationary

Table 2 show the output from unit root test Augmented Dickey-Fuller (ADF) of transformed data Variables Probability Result Constant 0.0137 Stationary Unemployment Rate 0.0000 Stationary Interest Rate 0.0000 Stationary Government Expenditure 0.0000 Stationary

Result from second differences root test is shown at above table. All variable is below 5% level that had been chose and it means all the variables is stationary and can proceed with other analysis.

Table 3 show output of Correlation Matrix Y X2 X3 X4 Y 1.000000 -0.575776 -0.601003 0.991078 X2 -0.575776 1.000000 0.331508 -0.518203 X3 -0.601003 0.331508 1.000000 -0.624793 X4 0.991078 -0.518203 -0.624793 1.000000

From the above correlation matrix it shows that there is negative relationship between x2 (unemployment) and Y (GDP). If unemployment rate increase the GDP of country will decrease. Similar with unemployment interest rate also had negative relationship with GDP. Lastly, there are positive relationship between government spending and GDP. If the government spending increases the GDP of a country will also increase.

Table 4 show Ramsey Reset Test on functional form Value df Probability t-statistic 1.518533 19 0.1453 F-statistic 2.305942 (1, 19) 0.1453 Likelihood ratio 3.092770 1 0.0786

Next test is Ramsey RESET test. For this test the probability value to be used here is either Tstatistic, F-statistic or the Likelihood ratio. As per output gathered, all p-value is greater than 5% significance level. Therefore, the null hypothesis is failed to reject and can be concluded that there is no misspecification for this model.

VI. CONCLUSION In conclusion this paper an empirical investigation was made to find out the relationship of unemployment, interest rate and government spending with GDP. Besides exploring existence and significance of relationship among the GDP and the macroeconomic factors, nature of relationship was also explored. On the basis of the statically examination of the data and results of the analysis it was concluded that only unemployment and government spending had significant impact on GDP.