# 1 is given automatically to the the consumption

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1 is given automatically to the the consumption sequence, which is to be the dependent variable, and the label v 2 is given to the income sequence, which is to be the independent variable 1

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D.S.G. POLLOCK: Aggregate Income and Consumption The Regression in Levels To begin, the logarithmic consumption data should be regressed against the logarithmic income data and a constant. The regression is performed most readily by clicking on the ˆ β symbol at the base of main window of the program. The slope coe cient of the regression should be noted as well as the coe cient of determination (R-Squared) which will strike you as remarkably close to unity. The e ff ects of the regression can be further investigated via the Graphs menu. The Regression in Di ff erences The regression in levels produces results that are commonly regarded as spu- rious. Therefore, we should consider a regression in which the variables are in di ff erenced form. To take the first di ff erences of the variables v 1 and v 2, one must access the Add menu of the data window. Thereafter, one can create some
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