You Have Obtained a Sub-Sample of 1744 Individuals from the Current

question 46

Essay

You have obtained a sub-sample of 1744 individuals from the Current Population Survey (CPS)and are interested in the relationship between weekly earnings and age. The regression, using heteroskedasticity-robust standard errors, yielded the following result: $\widehat { E a m }$ = 239.16 + 5.20 × Age, R² = 0.05, SER = 287.21.,
where Earn and Age are measured in dollars and years respectively.
(a)Interpret the results.
(b)Is the effect of age on earnings large?
(c)Why should age matter in the determination of earnings? Do the results suggest that there is a guarantee for earnings to rise for everyone as they become older? Do you think that the relationship between age and earnings is linear?
(d)The average age in this sample is 37.5 years. What is annual income in the sample?
(e)Interpret the measures of fit.

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Definitions:

Equilibrium Output

The level of output where the quantity of goods produced equals the quantity of goods consumed, resulting in a stable economy.

Government Expenditure

The total amount of spending by a government on goods, services, and public works.

Output

The quantity of goods or services produced in a given period by a firm, industry, or country.

Multiplier Size

A measure of the impact of fiscal and monetary policies on the national income, showing how initial spending leads to increased total spending.