Table 1 982 111 28 11SolutionReferring to Table 1 when the e

Table 1

98.2

11.1

2.8

1.1

Solution

Referring to Table 1, when the economist used a simple linear regression model with consumption as the dependent variable and GDP as the independent variable, he obtained an r² value of 0.971. What additional percentage of the total variation of consumptions has been explained by including aggregate prices in the multiple regression?

98.2

11.1

2.8

1.1

Answer 1.1

r² value for GDP = 0.971

r² value for GDP and price = 0.982

r² value difference =0.011

difference in percentage =0.011*100 =1.1