Silver Prices an Economist Is in the Process of Developing a Developing

question 72

Essay

Silver Prices
An economist is in the process of developing a model to predict the price of silver.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 first-order model with interaction: 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 ​ ​
-{Silver Prices Narrative} Is there sufficient evidence at the 1% significance level to conclude that the interaction term should be retained?

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Definitions:

Supply Shifts

Changes in the supply curve caused by factors other than the product's price, such as production costs, technology, and expectations, leading to more or less of the product being supplied at each price.

Equilibrium Quantity

The amount of goods or services supplied in a market that is exactly equal to the quantity demanded at the equilibrium price.

Rationing Device

A method used to distribute scarce resources, goods, or services among people.

Supply Shifts

Movements of the supply curve to the right or left, indicating a change in the quantity supplied at each price point, due to factors other than the price of the good itself.