Use Indicator (Dummy) Variables in Multiple Regression A) That the Annual Average Bonus Is $605

question 4

Multiple Choice

Use indicator (dummy) variables in multiple regression.
-A sample of 30 companies was randomly selected for a study investigating what
Factors affect the size of company bonuses. Data were collected on the number of
Employees at the company and whether or not the employees were unionized (1 = yes,
0 = no) . The following multiple regression model was fit to the data. The correct
Interpretation of the regression coefficient of Union is $$\begin{array}{l}\text { Dependent Variable is Average Annual Bonus }\\\\\begin{array} { l r r r r } \text { Predictor } & \text { Coef } & \text { SE Coef } & \text { T } & \text { P } \\\text { Constant } & 347.9 & 872.2 & 0.40 & 0.693 \\\text { Employees } & 0.6547 & 0.1105 & 5.92 & 0.000 \\\text { Union } & 1259.5 & 605.8 & 2.08 & 0.047\end{array}\end{array}$$

• A) that the annual average bonus is $605.80 less, on average, for unionized companies compared to non-unionized companies of the same size (same number of employees).
• B) that the annual average bonus is $605.80 more, on average, for unionized companies compared to non-unionized companies of the same size (same number of employees).
• C) that the annual average bonus is $1259.50 less, on average, for unionized companies compared to non-unionized companies of the same size (same number of employees).
• D) that the annual average bonus is $1259.50 more, on average, for unionized companies compared to non-unionized companies of the same size (same number of employees).
• E) that the annual average bonus is $208 more, on average, for unionized companies

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Definitions:

Simple Money Multiplier

A formula that estimates the maximum amount of money that banking can generate with each dollar of reserves.

Required Reserve Ratio

The fraction of deposits that banks are required by law to keep on hand or with the central bank, rather than lend out.

Money-Creation Process

The mechanisms through which new money is produced and introduced into the economy, primarily conducted by central banks and commercial banks.

Government Securities

Financial instruments issued by the government to finance its expenditures, including bonds, bills, and notes.