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Unformatted text preview: = β0/inc + β1 . Using observations for 100 families on annual income and consumption (both measured in dollars), the following equation is obtained:
cons = − 124.84 + 0.853inc ︿ n = 100, R2 = 0.692.
(i) Interpret the intercept in this equation, and comment on its sign and magnitude.
The intercept implies that when inc=0, cons is predicted to be 124.84, This consumption
function might be a poor predictor of consumption at very lowincome levels.
(ii) What is the predicted consumption when family income is $30,000?
cons =− 124.84 + 0.53 ∙ 30000 = 16024.84 ︿ (iii) With inc on the xaxis, draw a graph of the estimated MPC and APC. C1. The data in 401K.RAW are a subset of data analyzed by Papke (1995) to study the relationship between participation in a 401(k) pension plan and the generosity of the plan. The variable prate is the percentage of eligible workers with an active account; this is the variable we would like to explain. The measure of generosity is the plan...
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This document was uploaded on 02/04/2014.
 Spring '14
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