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.

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Definitions:

Comprehensive Income

This term includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Comprehensive Income

A measure of all changes in equity of a company that result from recognized transactions and other economic events of the period other than those resulting from investments by and distributions to owners.

Unrealized Gains

Profits from investments that have increased in value but have not yet been sold for cash.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been deducted from total revenues.