Suppose an Economist Has Developed a Model for Forecasting Annual

question 10

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 conclusions should be reached?

• A) Conclude that no positive autocorrelation exists
• B) Conclude that significant positive autocorrelation exists
• C) Uncertain whether positive or negative autocorrelation exists
• D) No significant autocorrelation exists.