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Answers - ECON332 Assignment VERSION NUMBER 2 Due date 21st...

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ECON332 Assignment VERSION NUMBER 2 Due date 21 st April 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.

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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: Since most houses in the USA are bought on mortgages, when mortgage rates go up, mortgaging houses become less attractive and thus the total housing sales in the USA decreases and vice versa. As per the output, it is illustrated that mortgage rates and housing sales are negatively correlated; this substantiates the economic logic stated above. Coefficients : With every percentage increase in the mortgage rate the total housing sales in the USA decreases by \$12.21138. Looking at the intercept value, when mortgage rates are 0% the total housing sales in the USA is \$ 159.5925. Statistically Useful: From the calculated coefficient of determination of 46.99% it is evident that the model is not very useful in predicting the total housing sales in the USA. Only 46.99% of the variation in sales is explained by the variations in mortgage
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Answers - ECON332 Assignment VERSION NUMBER 2 Due date 21st...

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