Table 133 An economist is interested to see how consumption

Table 13.3

*An economist is interested to see how consumption for an economy (in $ billions) is influenced by gross domestic product ($ billions) and aggregate price (consumer price index).

Referring to Table 13-3, one economy in the sample had an aggregate consumption level of $3 billion, a GDP of $3.5 billion, and an aggregate price level of 125. What is the residual for this data point?

-$1.33 billion

$2.52 billion

$0.48 billion

-$2.52 billion

Referring to Table 13-3, one economy in the sample had an aggregate consumption level of $4 billion, a GDP of $6 billion, and an aggregate price level of 200. What is the residual for this data point?

-$0.39 billion

$4.39 billion

-$1.33 billion

$0.39 billion

Referring to Table 13-3, to test for the significance of the coefficient on aggregate price index, the value of the relevant t-statistic is:

2.365

0.143

-1.960

-0.219

SUMMARY OUTPUT Regression Statistics Multiple R R Square Adjusted R Square 0.976 Standard Error Observations 0.991 0.982 0.299 10 ANOVA MS 6.7082 186.325 0.0897 df Signif 0.0001 Regression Residual Total 33.4163 0.6277 34.0440 Coeff - 0.0861 0.7654 - 0.0006 P-value 0.8837 0.0001 0.8330 StdEITor tStat 0.5674-0.152 Intercept GDP Price 0. 0574 13.340 0.0028 0.219

Solution

The least sqaure regression line is as follows:

Consumption=-0.0861+0.7654GDP-0.0006Price

Substitute GDP with 3.5, Price with 125 in the above equation to get the predicted consumption value.

The predicted value is $2.5178 billion.

The observed consumption is $3 billion. Therefore, residual is

r=observed-expected

3-2.5178=$0.4822 billion

Apply the same procedure with changes in value sto be substituted in the regression equation.

The t test statistic value is -0.219