THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION

question 166

Essay

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
An economist is in the process of developing a model to predict the price of gold.She believes that the two most important variables are the price of a barrel of oil (x₁)and the interest rate (x₂).She proposes the model y = β₀ + β₁x₁ + β₂x₂ + β₃x₁x₃ + ε.A random sample of 20 daily observations was taken.The computer output is shown below.
THE REGRESSION EQUATION IS
y = 115.6 + 22.3x₁ + 14.7x₂ - 1.36x₁x₂

S = 20.9 R-Sq = 55.4%
ANALYSIS OF VARIANCE

-In the regression model Y = β₀ + β₂X₁ + β₂X₂ + ε,the extent of any multicollinearity can be evaluated by finding the correlation between X₂ and X₂ in the sample.Explain why this is so.

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Definitions:

One Acre Fund

A non-profit organization that supplies smallholder farmers in Africa with asset-based financing and agriculture training services to reduce hunger and poverty.

African Smallholder Farmers

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Urban U.S. Gardeners

Individuals or groups engaged in gardening within urban environments in the United States, focusing on growing plants for consumption or aesthetic purposes in limited space.

CSR Strategy

Corporate Social Responsibility Strategy; a business approach that contributes to sustainable development by delivering economic, social, and environmental benefits for all stakeholders.