ECM3MEC Practice exam Solution.pdf

ECM3MEC Practice exam Solution.pdf - ECM3MEC Semester 1...

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Unformatted text preview: ECM3MEC Semester 1, 2016 Practice Exercise Please note that this document does not represent thoflnal exam questions. But it 1's to show some exercises, which are referred to tutorials, lecture notes and the prescribed textbook. Question 1 To investigate detenninants on net financial wealth (nettfa), an organization collected data on age of the survey respondent (a ge), annual family income (inc), family'size) and participation in ce1tain pension plans for people in the United States (e401k), marriage status (marr). The wealth and income variables are both recorded in thousands of dollars. Estimated equation is given as below: nettfa = 20.325 - 0.203mc + 0.0mm:2 - 1.69age + 0.031age2 — 1.29fsize + 9.4le401k + 0.64ma1e — 2.9marr (10.03) (0.078) (0.0006) (0.498) (0.005?) (0.498) (1.28) (1.61) (1.698) R2 = 0.2039 n = 9275 SSR = 30204719 where standard errors are presented in brackets. a. Interpret the slope coefficients and discuss their economic meaning. What coefficients are statistically significant? (1‘ 2 -' ".L’: ‘ (huff ' . , i9“ 7751.611) III). 30:11 V6 C m {1‘ Cite (flat-LG. (l 1’ (inmfar— PUG .HVQ Cl r'.:/l7'(':oLQ VOL LL13, . . . . 651mm (H 1’ thlr > @Tfm H J,‘ (‘./.‘((:._‘i_] (J 46 (MC/2' (-‘I'JL"-'S 4({0 mu”. 1‘ C1 bit. tg mil S'tizt'l'fti] “Hal?“ :1" {if miflt‘md _ . . . rYLCg‘xununq b. chl level of age and level of Income at winch the wealth mm. given the following equation: '=- @1100:an nettfa = 19.06 - 0.246inc + 0.0mm2 - 1.54age + 0.03’1age2 _ 1.85fsize + 9.45:401k (9.97) (0.075) (0.0006) (0.491) (0.0057) (0.4) (1.20) 111:0.2036 11:9275 SSR=30216419 cl. What is implied by the below estimated equation? Discuss the implication. ‘73 A , . A a? = 978.96 — 80.1 f nettfa + 0.854inettfa2 (5.15) (0.978) @’ Nflfi’l— A, vw‘fir J1) [JZC/‘f_LLrQ ___+ )_ R2=0.9511 n=9275 Weak 112,. (ff-V Wm ((0.134le where u is residuals fi'om the equation in part a, and the standard errors are reported in brackets e. Design a new equation that can differentiate net wealth of single male and single female from the others. ~~ H _. , . ‘ - . ._.. I; I i ES); Fg are, “in. (tar/hiya: (.‘l/[ffeir‘ancfo thyonrsl’fim/ befitfonv‘xz Question 2 film: (“G/i Put "ll yd; (J (Wu!) G N( [(11.7 bE’MQ (fat!) C S‘dhj‘io‘ f‘)‘Lr\_,€Q_) One version of the permanent income hypothesis .f consumption is that file growth in, consumption is unpredictable. [Another version is t mt the change in consumption itself is WSM. Chapter 15) for discussion of the PIH.] Let go; = log(c:) - log(ct.1) be the growth in real per capita consumption (of nonchn'ables and services). Then the PIH implies that E(gc;/Ig.1) = E(gct), where 13-1 denotes information known at time (t-l); in this case, t denotes a year. a. From the estimated equation below, how caléyou conclude about the validity of PIH? c' t got = 0. 11 + 0.4f6 gem (0.0038) (0.156) R2 = 0.1985 n = 35 ‘7 ' i Z 1fl‘"‘._ "L 13-") I 1-; 2" '2': ( , (‘8‘) 5—0 a ' :’ ~O (fix/awaits! Mt) Cr) RLL‘J‘QLHGIL with»: (‘0qu Hi; Ho of [79171 [13 [7‘51 iii [on (film w 101,2 (rr‘ Lil-Mt or Him 9.; OLIZ‘ b. In order to have further investigation on predictability of the growth in consumption, we incorporate growth in per capita lea-l income (gy),3-1no11th bill iate (i3) and inflation 1ate (int).A1'e these new variables individlzaily 01 jointly significant at the 5% level using appmpnate tests? [7 gct= 0. 226 + 0. 433 get.1— 0.1 8 gym — 0. 0g07i3t_ 1 — 0.(]0081nft1 (0.007) (0.289) (0.1946) (0.001) (0.001) R2 = 0.303 11 = 35 ' l (12,, .. ch‘UlflmW/t l (but! HT" 7'01) H‘ 1 (Li.— [emf (ma d We £26328 :{l C} // (irr'qlgfig _ ‘ PVaCUf‘Cl/ij +0 “Hid HZ); ftp, FMth/ful'modgx LA fix; one. in Part (a) ‘. Reacvflh’l’uj +0 13119, H” ”mi LLrLfflz‘Sth'C/hld Marcia/Q 1:5 qu‘zd‘U-J mfmf 09 " CJ-{h‘ca/e- Lin/emf, {Tm “me P Jib Hibahm wLHZ‘ dlfflwuwmfor): g ‘ ' ' _ "H H . O T . 7’ (number (if ms th‘wng) and dfzficimmn‘mj‘w)‘ n I 44’ # g J ‘4 2% 00V J C61” Wfldnnfl'flg mica/13g) 6 - If” ltfztfi’lw I affirm rifle ', WI‘Z'W Hm. Hz) 'rdfl F gawk V5 (WWW $61M 2‘ {1‘ 6" F : W Mm ' ‘F‘ ““W ‘f WW” Mamba ' 93 Z / (r1 "' k ~ 0 L num’bzr c ,Qx M [email protected] Mir J m ‘HZLQ— u’U‘M ‘h’TL W‘Cigl Wa/ CU‘GL njEL (JLVM SE a! VIP Q’LLWLU dfl'Li/Q. CL YULLU Y‘I’YLL-L/éfl 1’?) f Z_ ‘ - 2‘ A _ J GLLLMLth/ fia’amhb 1,05le Klan/«21; Mai K __ I :21?— - (23 —+ may? :3) F _, ‘_ _ w r «mm (I -~ REA/6» M ) (my .' I- —~ .: fly}? : was} 42.96 Q — (ifzao_3>/(?>{;- [4‘0 Acadflil/‘dj 4D W Ffijacfim Hub” 1x0— rfml CID Pig‘gdf Ml Ha‘ ”Ufa- Wren, mwf chtrmlobu (UL TOMA—B? mg’ifimffmnf Qkflfi'caéflj aj‘ 570. c. “That are you informed from this equation? Discuss any further tests and corrections to make our model robus . 0 '. F10 If” 97/ F35 9’ I . (:2. ‘ ‘0‘, = 0.0209 - 0.802 gem + 0.089 gym - 000121334 + 0.00018infi.1 + 0.76 6370:;1 + 0. 350,4 (0.015) (0.597) (0.206) (0.0013) (0.001) (0.504) (0.274) R1 = 0.079 u= 35 ...
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