Suppose the Fitted (Assumed Causal) Regression Line for Your Data

question 44

Multiple Choice

Suppose the fitted (assumed causal) regression line for your data is as follows: Log(Output) = 6.2 + 0.4 × Log(Labor) + 0.5 × Log(Capital)
Interpret the coefficient on Log(Labor) .

• A) Holding capital fixed, when labor goes up by 1, output goes up by 0.4
• B) Holding capital fixed, when labor goes up by 1, output goes up by 6.6
• C) Holding capital fixed, when labor goes up by 1%, output goes up by 0.4%
• D) Holding capital fixed, when labor goes up by 1%, output goes up by 40 units

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Definitions:

Rate of Inflation

The percentage increase in the price level of goods and services in an economy over a period of time.

Misery Index

An economic indicator created by adding the unemployment rate to the inflation rate, meant to represent the average citizen's economic well-being.

Unemployment Rate

The segment of the labor force that is currently jobless and engaging in job-seeking activities.

Deflation

A decrease in the general price level of goods and services, often indicating a contraction in the amount of money and credit in the economy.