Suppose You Estimate a Distributed Lag Model of U A)What Is This Model Called? Why Would You Estimate This

question 4

Essay

Suppose you estimate a distributed lag model of U.S.Personal Consumption Expenditures (billions)on U.S.Personal Income (billions)using quarterly data for the period 1969Q1-2013Q3 and you get $$\begin{array} { l } \text { Consumption } _ { t } =& - 135.034 +& 0.757 \text { Income } _ { t } +& 0.163 \text { Income } _ { t - 1 } -& 0.243 \text { Income } _ { t - 2 }-& 0.158 \text { Income } _ { t - 3 } +& 0.307 \text { Income } _ { t - 4 } \\&( 11.244 )& ( 0.099 ) &( 0.153 ) & ( 0.151 )&(0.159) & (0.107) \\&&&n = 175 \\&&&R ^ { 2 } = .9994 \\\end{array}$$
a)What is this model called? Why would you estimate this type of function?
b)Are the lags individually significant at the 5% level?
c)What do your results in part b imply about your preferred model?

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