Consider the Following Residual Plot

question 49

Multiple Choice

Consider the following residual plot. Given this plot,what conclusion should be reached?

• A)There appears to be no basis for concluding that the relationship between the x and y variable is not linear.
• B)The assumption of constant variance seems to be supported by this plot.
• C)Both A and B are true.
• D)Neither A nor B are true.

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Definitions:

Inflationary Expectations

The anticipation of future inflation rates, influencing economic decisions and behavior.

Discretionary Policy

Economic policies based on ad hoc decisions by the government or monetary authorities to influence the economy, such as changes in spending or taxation.

Inflationary Expectations

The anticipation by consumers and businesses of future inflation, which can influence economic behavior such as spending, saving, and investment.

Potential GDP

The maximum output an economy can produce without triggering inflation, if all resources are fully employed.