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a) Scatter graph of total bankruptcy
The total bancruptcy has increased over the period. There was brightened financial picture of the households after 1980, and this soared the future prospects of the consumers. This reflected a strong economic recovery, sharp drops in energy prices, rising stock market, interest rates and inflation bolstered the general financial health. The recession in early 1990s led to slow recovery and need for credit by consumers. By the late 1990s, economy improved and employment rates increased and this bolstered the confidence of consumers.
b) Scatter graph of business bancruptcy
The graph depicts a decrease in filings of business bancrupticies over the period, with the filing peak in 1985. Since then, there has been almost nearly monotonic decline in business bancrupticies.
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c) Scatter graph of consumer bankruptcy
Personal or consumer bancruptcy allows individuals to declare their bancruptcies, where personal items that a debtor might require for survival are exempted from filing. The graph depicts a monotonous increase in consumer bancrupticies over the period. The rate has increased sharply during recession periods.
d) Why consumer bankruptcy mimic total bankruptcy
The increase in consumer bancruptcy is proportional to total bancruptcy due to the increase in absolute number in the country. There are dramatic social and economic changes that occurred in 1990s, characterised by high economic growth, and the data captures the real bancruoptcy of the population. Furthermore, businesses that have financial troubles have problems identifying themselves as entrepreneurs. The personal affairs of entrepreneurs are so intertwined with the business that it becomes challenging to distinguish between business and consumer debt. In most cases, business debtors escaped filing scrutiny based on standards of bancruptcy code.
The coefficient for GDP is 1.5138722. This reflects that a 10% increase in GDP increases bancruptcy by 15% and a 10% decrease in GDP lowers bancruptcy by 15%.