A Regression Analysis Involving 45 Observations Relating a Dependent Variable

question 22

Short Answer

A regression analysis involving 45 observations relating a dependent variable and two independent variables resulted in the following information.
​ = .408 + 1.3387x₁ + 2x₂
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The SSE for the above model is 49. When two other independent variables were added to the model, the following information was provided.
​ = 1.2 + 3x₁ + 12x₂ + 4x₃ + 8x₄
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This model's SSE is 40.
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At a .05 level of significance, test to determine if the two added independent variables contribute significantly to the model.

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Definitions:

Rational Expectations Theory

A concept suggesting that individuals make decisions based on their rational outlook, available information, and past experiences.

Certainty Equivalent Theory

A concept in decision theory that quantifies the value of a risky asset in terms of a certain amount of money.

Supply-Side Policy

Economic strategies aimed at increasing the production capacity of an economy by improving the conditions for businesses and producers.

Government Spending

The total amount of public expenditures by the government, including salaries, infrastructure projects, and public services.