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Unformatted text preview: implies MORE explanatory power. Simultaneously, as more variables are added, m rises, which causes adjusted R^2 to fall, which implies less explanatory. Hence, if the SSE effect dominates the m effect, adjusted R^2 rises and the model has more explanatory power. o BUT you dont want to just throw in extraneous variables into your model to increase adj. R^2 because economic theory prevents it. If you only have one model, there is NO need for adjusted R^2 just use regular R^2...
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- Spring '09
- Supply And Demand