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# HW4A - Econ 444 Elementary Econometrics Fall 2007 ANSWERS...

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Econ 444 Elementary Econometrics Fall 2007 ANSWERS TO HOMEWORK EXERCISE: 4 (a) The results are ˆ Y i = - 143 . 94+ 0 . 946 X i (0 . 003) t = 281 . 498 N = 242 , R 2 = 0 . 997 (e) For the regression in part (c) ˆ Y i = 63 . 970+ 0 . 864 X i (0 . 009) t = 100 . 486 N = 41 , R 2 = 0 . 996 For the regression in part (d) ˆ Y i = 0 . 122+ 0 . 969 X i (0 . 009) t = 111 . 999 N = 41 , R 2 = 0 . 997 (f) When real disposable income is zero, the expected real consumption is estimated to be -143.94 billions of dollars (in terms of year 2000). The sign of the intercept does not make sense. (g) When real disposable income increases by 1 billion dollar, expected real consumption is estimated to increases by 0.946 billion dollars (in terms of year 2000). The sign of the slope coefficient makes sense. Because it is smaller than one, the magnitude makes sense. (h) The t -value is 68.889. The critical values for 10%, 5%, and 1% levels are approximately 1.645, 1.960, and 2.576 for the large sample size of 242. Since the t -value is larger than the critical values, we reject the null hypothesis at each level.

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