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    Variation of consumption

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    An economist is interested to see how consumption for an economy (in $ billions) is influenced by gross domestic product ($ billions) and aggregate price (consumer price index). The Microsoft Excel output of this regression is partially reproduced below.

    Referring to Table 14-3, when the economist used a simple linear regression model with consumption as the dependent variable and GDP as the independent variable, he obtained an r2 value of 0.971. What additional percentage of the total variation of consumption has been explained by including aggregate prices in the multiple regression?

    A) 98.2
    B) 1.1
    C) 2.8
    D) 11.1

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    Solution Preview

    Answer is B) 1.1


    The percentage of the total variation of consumption explained by taking GDP as the ...

    Solution Summary

    This provides an example of working with variation of consumption and aggregate prices in the context of regression analysis.