853inc n 100 r2 0692

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

This document was uploaded on 02/04/2014.

Ask a homework question - tutors are online