(Situation O) Using Data from the Post-Korean War Period, an Economist

question 22

Multiple Choice

(Situation O) Using data from the post-Korean war period, an economist modeled annual consumption, $y _ { t }$ , as a function of total labor income, $\mathrm { x } _ { 1 \mathrm { t } }$ , and total property income, $\mathrm { x } _ { 2 \mathrm { t } }$ , with the following results. Assume data for $\mathrm { n } = 40$ years were used in the analysis.
$$\hat { y } _ { t } = 7.81 + 0.91 x _ { 1 t } + 0.57 x _ { 2 t } \quad s = 1.29 \quad \text { Durbin-Watson } d = 2.09$$
-For the situation above, give the rejection region for the Durbin-Watson test for autocorrelation of residuals. Use ? = 0.10.

• A) \(\mathrm { d } < 1.39\)
• B) \(d > 1.60\) or \(4 - d > 1.60\)
• C) \(1.39 < \mathrm { d } < 1.60\)
• D) \(\mathrm { d } < 1.39\) or \(4 - \mathrm { d } < 1.39\)

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Definitions:

Profitability

The degree to which a company or business activity makes a profit, typically measured over a specific period of time.

Leverage

The use of borrowed funds to increase the potential return of an investment.

Solvency

A measure of a company's ability to meet its long-term financial obligations, reflecting its financial stability and health.

Profitability Analysis

Evaluation of a company's ability to generate profits from its operations, typically assessed through various financial metrics and ratios.