# 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)

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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.

SUMMARY OUTPUT

Regression Statistics

Multiple R 0.991

R Square 0.982

Adjusted R Square 0.976

Standard error 0.299

Observations 10

ANOVA

df SS MS F SignifF

Regression 2 33.4163 16.7082 186.325 0.0001

Residual 7 0.6277 0.0897

Total 9 34.0440

Coeff StdError t Stat P-Value

Intercept -0.0861 0.5674 -0.152 0.8837

GDP 0.7654 0.0574 13.340 0.0001

Price -0.0006 0.0028 -0.219 0.8330

Referring to the table, 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. 11.1

C. 2.8

D. 1.1

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The correct answer is D. The simple linear regression had explained 97.1% of the total variation in consumption (as ...

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