Instruction 16-3
to Explain Personal Consumption (CONS) Measured in Dollars

question 51

Multiple Choice

Instruction 16-3
To explain personal consumption (CONS) measured in dollars, data is collected for
$\begin{array}{|l|l|}\hline\text { INC: } & \text { personal income in dollars } \\\hline \text { CRDTLIM: } & \begin{array}{l}\text { \$1 plus the credit limit in dollars available to } \\\text { the individual }\end{array} \\\hline \text { APR: } & \begin{array}{l}\text { average annualised percentage interest rate } \\\text { for borrowing for the individual }\end{array} \\\hline & \begin{array}{l}\text { per person advertising expenditure in dollars } \\\text { by manufacturers in the city where the } \\\text { ADVT: }\end{array} \\\hline \text { GENDER: } & \text { gender of the individual; } 1 \text { if female, } 0 \text { if male }\\\hline \end{array}$
A regression analysis was performed with CONS as the dependent variable and log(CRDTLIM) , log(APR) , log(ADVT) and GENDER as the independent variables. The estimated model was
= 2.28 ? 0.29 log(CRDTLIM) + 5.77 log(APR) + 2.35 log(ADVT) + 0.39 GENDER
-Referring to Instruction 16-3,and noting that ADVT has been transformed using the log transformation,what is the correct interpretation for the estimated coefficient for APR?

• A) A 1% increase in mean annualised percentage interest rate will result in an estimated mean increase of 5.77% on personal consumption holding other variables constant.
• B) A 1% point increase in mean annualised percentage interest rate will result in an estimated mean increase of $5.77 on personal consumption holding other variables constant.
• C) A 100% increase in mean annualised percentage interest rate will result in an estimated mean increase of $5.77 on personal consumption holding other variables constant.
• D) A 100% increase in mean annualised percentage interest rate will result in an estimated mean increase of 5.77% on personal consumption holding other variables constant.

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Definitions:

Avoidance Theory

A psychological theory suggesting that individuals may engage in certain behaviors to avoid experiencing discomfort or distressing thoughts and feelings.

Bodily Arousal

The physiological response of the body to stimuli, often leading to an increase in heart rate, blood pressure, and energy level as part of the fight or flight response.

Irrational Assumptions

Erroneous beliefs that lack evidence or rationality, often leading to maladaptive emotions and behaviors.

Existential Anxiety

According to existential theorists, a universal fear of the limits and responsibilities of one’s existence.