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:

SSE

Stands for Sum of Squared Errors, a measure used in statistics to indicate the difference between the observed and predicted values.

Coefficient Of Determination

A statistical measure, often denoted as R^2, that illustrates the proportion of variance for a dependent variable that's explained by an independent variable or variables in a regression model.

Y-intercept

The point where a line crosses the Y-axis of a graph.

Linear Regression

A statistical method for modeling the relationship between a dependent variable and one or more independent variables using a linear equation.