Assume That You Had Data for a Cross-Section of 100

question 61

Essay

Assume that you had data for a cross-section of 100 households with data on consumption and personal disposable income. If you fit a linear regression function regressing consumption on disposable income, what prior expectations do you have about the slope and the intercept? The slope of this regression function is called the "marginal propensity to consume." If, instead, you fit a log-log model, then what is the interpretation of the slope? Do you have any prior expectation about its size?

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Definitions:

Palmaris Longus

A superficial muscle in the forearm that is involved in flexing the wrist and can be absent in a minority of the population.

Flexor Carpi Radialis

A muscle in the forearm that acts to flex and abduct the hand at the wrist joint.

Abductor Pollicis Longus

A muscle in the forearm that facilitates the abduction and extension of the thumb.

Flexor Digitorum Profundus

A muscle in the forearm that flexes the fingers, enabling grasping, writing, and other intricate movements.