Suppose an Economist Has Developed a Model for Forecasting Annual

question 16

Multiple Choice

Suppose an economist has developed a model for forecasting annual consumption,y_t,as function of total labor income,x_1t ,and total property income,x_2t based on 20 years on annual data.The following regression model has been developed: _t = 7.81 + 0.91x_1t + 0.57x_2t 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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