You Have Obtained a Sample of 14,925 Individuals from the Current

question 12

Essay

You have obtained a sample of 14,925 individuals from the Current Population Survey (CPS)and are interested in the relationship between average hourly earnings and years of education. The regression yields the following result: $\hat { a h e }$ = -4.58 + 1.71×educ , R² = 0.182, SER = 9.30
where ahe and educ are measured in dollars and years respectively.
a. Interpret the coefficients and the regression R².
b. Is the effect of education on earnings large?
c. Why should education matter in the determination of earnings? Do the results suggest that there is a guarantee for average hourly earnings to rise for everyone as they receive an additional year of education? Do you think that the relationship between education and average hourly earnings is linear?
d. The average years of education in this sample is 13.5 years. What is mean of average hourly earnings in the sample?
e. Interpret the measure SER. What is its unit of measurement.

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Definitions:

Gross Domestic Product (GDP)

The aggregate value, measured in terms of money or market worth, of every finished product and service generated within a country's borders over a certain time span.

Common Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's profits.

Factory

A building or complex of buildings where goods are manufactured or assembled chiefly by machine.

Foreign Investment

The inflow of capital from external sources into a country to purchase assets, buy stocks, or fund projects, enhancing economic growth.