ps5-questions - Middle East Technical University Faculty of...

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Middle East Technical University Faculty of Economics and Administrative Sciences Department of Economics Econ 206 – Spring 2008 PROBLEM SET # 5 1. Write the assumptions of the simple linear regression model. 2. Let ˆ yx β and ˆ xy β represent the slopes in the regression of Y on X and X on Y respectively. Show that 2 ˆ ˆ yx xy r β β = . 3. 0 1 t t Y X u β β = + + . Estimate 0 β and 1 β . 4. Show that 2 2 xy R r = . 5. The data given below is related to the U.S. economy for the period 1981-1996. The Y variable in this table is the aggregate personal consumption expenditure (PCE) and the X variable is gross domestic product (GDP), a measure of aggregate income, both measured in billion of 1992 dollars. Therefore, the data are in ‘real’ terms; that is, they are measured in constant (1992) prices. personal consumption expenditure Y to the gross domestic product X and interpret the coefficients.
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