If We Are Testing the Significance of the Independent Variable

question 62

Multiple Choice

If we are testing the significance of the independent variable X₁ and we reject the null hypothesis H₀: β₁ = 0, we conclude that

• A) X₁ is significantly related to y.
• B) X₁ is not significantly related to y.
• C) X₁ is an unimportant independent variable.
• D) β₁ is significantly related to the dependent variable y.

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Definitions:

Budgeted Net Income

The projected net income for a future period, based on expected revenues and expenses.

Variable Expenses

Expenses directly linked to the volume of output, adjusting in accordance with business activity levels.

Fixed Expenses

Recurring costs that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to a change in its sales volume, signifying the impact of fixed versus variable costs.