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# Quantitiative Methods

See attached files. Only questions 4 through 10 are required.

Consider the linear regression equation which predicts expenditures on imported goods based on personal disposable income. They are both measured in billions of 1982 dollars.
Y'=-261.09+0.2453xt
(31.327) (0.0147)
to=8.33 and t1=16.616
4. According to the equation above, if personal disposable income rises by \$4 billion, by how much will spending on imports rise
5. If total personal disposable income is \$2.3 trillion how much can we expect to be spent on imports?

Questions 7 through 9 are based on the following information.
Suppose you are looking at a linear regression equation of the form:
Y'=1.2108 +0.4014x1,i+0.02702,i
(0.9485) (0.2848) (0.1252)
to=1.28
t1=1.57
t2=0.22
8. You now see that R2 is 0.8241. Explain why is so important in light of the values for the t-statistics
9. Now, you are told that the value of the correlation coefficient, R, between the two independent variables, is 0.9107. In other words, Rx1, x2=0.9107. Is this something to be concerned about, why or why not.
10. Suppose we plot the squared residuals and the pattern looks like the following. What does this indicate. Be specific.
Use correct # of decimal places, when not sure round to 4 places.

#### Solution Summary

Complete, Neat and Step-by-step solutions are provided except for questions 6 and 7.

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