Question

1. A model regressing consumption (C) on income (I) and wealth (W) yielded the following results. All variables are measured in thousands of dollars.

R2 = 0.86 R2 = 0.79 calc F = 17.42 n = 25

C = 402 + 0.83 I + 0.71 W

(0.71) (6.21) (5.47)

where the t-values are shown in parentheses.

a. What is the meaning of the intercept term?

b. Are the coefficients significant at the 5 percent level?

c. Is the overall model significant at the 10 percent level?

d. Construct a 99% confidence interval for the population regression coefficient linking wealth and consumption.

Answer 1

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Answer:

a)

The meaning of the intercept is that the fixed compensation is 402 thousand dollars even when the income and wealth are zero

b)

c)

d)