# econ216 - Version 2 Answer 4.25 Using the output data when...

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Version 2 Answer 4.25 Using the output data, when S & P is 1100 DJIA is 10257.78. The coefficient of correlation value of 0.839512 suggests a strong positive relationship between the S & P and the DJIA markets. This is verified by the coefficient of S & P (b 1 ) illustrating that when the S & P market increases by \$1 the DJIA increases by \$6.53262885. Answer Data Set 2 THS represents total housing sales in the USA (monthly data) MR represents the mortgage rate ICS represents the index of consumer sentiment or confidence in the US. Simple regression analysis: Economic logic : In USA most houses are bought on mortgages, mortgage houses become less attractive when mortgage rate go up and total houses sales in USA decreases and vice versa. Housing sales and mortgage rate are negatively correlated according to the output. Coefficients : The total housing sales in the USA decreases by \$12.21138 with every percentage increase in the mortgage rate. Looking at the intercept value, the total housing sales in the USA is \$ 159.5925 when mortgage rates are 0%. Statistically Useful: The model is not very useful in predicting the total housing sales in the USA as the calculated coefficient of determination is 46.99%. The reset of the portion which

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