Given the Amount of Money and Effort That You Have $R ^ { 2 }$

question 48

Essay

Given the amount of money and effort that you have spent on your education, you wonder if it was (is) all worth it. You therefore collect data from the Current Population Survey (CPS) and estimate a linear relationship between earnings and the years of education of individuals. What would be the effect on your regression slope and intercept if you measured earnings in thousands of dollars rather than in dollars? Would the regression $R ^ { 2 }$ be affected? Should statistical inference be dependent on the scale of variables? Discuss.

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Definitions:

Postemployment Benefits

Benefits, including pension plans and healthcare, that an employee is entitled to upon retirement or termination of service.

Actuarial Information

Data and analysis provided by actuaries, involved in assessing risks and uncertainties, particularly in the insurance and finance industries.

Pension Fund

A pool of funds accumulated from contributions to provide retirement benefits to employees.

Interest Rate

The percentage of a loan amount charged by the lender to the borrower for the use of money, expressed as a yearly rate.