When We Use Ordinary Least Squares to Determine the Relationship

question 9

Multiple Choice

When we use ordinary least squares to determine the relationship between changes in consumption and changes in both current and lagged income,we find that

• A)only current income influences current consumption.
• B)current income has no impact on current consumption.
• C)consumption is not affected by income in any quarter.
• D)current income, last quarter's income, and income two quarter's ago all have the same impact on current consumption.
• E) current income has a greater impact on consumption than income lagged one quarter.

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Definitions:

Ordinary annuity

Regular payments of the same amount made at set intervals, during which interest is calculated and added at the end of each period.

Conditional sale contract

An agreement where the sale is conditional upon certain terms, often used in property and vehicle sales where possession is granted but legal ownership is retained by the seller until full payment is received.

Compounded monthly

The process of adding interest to the principal sum of a loan or deposit, where the interest is added monthly.

Compounded monthly

The process of calculating interest on an investment or loan each month, with each month's interest added to the principal.