5 Referring to Table 1 what is the predicted consumption lev

5. Referring to Table 1, what is the predicted consumption level for an economy with GDP equal to $4 billion and an aggregate price index of 150?

a. $1.39 billion

b. $2.89 billion

c. $4.75 billion

d. $9.45 billion

Solution

Predicted consumption level = -0.0861 + (4*0.7654)+(150*-0.0006)

= 2.8855 million ~ 2.89 million