Suppose an Economist Has Developed a Model for Forecasting Annual

question 64

Multiple Choice

Suppose an economist has developed a model for forecasting annual consumption, yt, as function of total labor income, x1t, and total property income, x2t based on 20 years on annual data. The following regression model has been developed: t= 7.81 + 0.91x1t + 0.57x2t with the standard error = 1.29 and the Durbin-Watson d statistic = 2.09. Using an alpha = .05, which of the following is the correct critical value for testing whether the residuals are autocorrelated?

• A) 1.20 and 1.41
• B) 1.10 and 1.54
• C) 1.08 and 1.53
• D) Can't be determined without seeing the residuals.

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Definitions:

Residual Value

It's the estimated value that an asset will realize upon its sale at the end of its useful life, after depreciation has been taken into account.

Depreciable Cost

The amount of an asset’s cost that will be allocated to depreciation expense over its useful life, determined by the difference between the asset’s initial cost and its residual value.

Acquisition Cost

The total cost incurred to acquire an asset or service, including purchase price and all other expenses related to acquisition.

Depreciation Method

A systematic approach used to allocate the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.