THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION

question 158

Multiple Choice

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
A loan officer is interested in examining the determinants of the total dollar value of residential loans made during a month.She used Y = β₀ + β₁X₁ + β₂X₂ + β₃X₃ + β₄X₄ + ε to model the relationship,where Y is the total dollar value of residential loans in a month (in millions of dollars) ,X₁ is the number of loans,X₂ is the interest rate,X₃ is the dollar value of expenditures of the bank on advertising (in thousands of dollars) ,and X₄ is a dummy variable equal to 1 if the observation is either June,July,or August.
-Suppose that she obtained = 3.8 + 0.23x₁ - 1.31x₂ + 0.032x₃ + 1.05x₄ - 0.22x₃x₄ by using data from the past 24 months.How would we interpret the coefficient of x₃x₄?

• A)On an average,we would expect $220,000 less in loans during the months of June,July,and August.
• B)Advertising is more effective during June,July,and August.
• C)Advertising is less effective in June,July,and August.
• D)On an average,we would expect $220,000 more in loans during the months of June,July,and August.

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Definitions:

Economists Oppose

Typically involves economists expressing disagreement with certain policies or practices due to predicted negative economic impacts.

Usury Laws

Regulations put in place to limit the interest rate that can be charged on a loan, intended to protect consumers from excessively high rates.

Interest Rate Ceilings

Interest rate ceilings are regulatory measures to limit the maximum interest rate that can be charged on loans and credit products to protect consumers.

Theory Of Profits

An explanation of how profits arise in markets, focusing on factors like risk, investment returns, and the dynamics between revenue and costs.