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

question 46

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 $\mathrm { n } = 40 \mathrm { years }$ were used in the analysis.
$$\hat { y } _ { t } = 7.81 + 0.91 x _ { 1 t } + 0.57 x _ { 2 t } \quad s = 1.29 \quad \text { Durbin-Watson } d = 2.09$$
-Is there evidence of positive autocorrelation of residuals in the consumption model presented above? Test using $\alpha = 0.10$ .

• A) Yes, since the standard deviation \(\mathrm { s } = 1.29\) is small.
• B) Yes, since the Durbin-Watson statistic \(d = 2.09\) falls in the rejection region.
• C) No, since the standard deviation \(\mathrm { s } = 1.29\) is small.
• D) No, since the Durbin-Watson statistic \(\mathrm { d } = 2.09\) falls in the nonrejection region.

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