Consider the Following to Answer the Question(s) Below

question 18

Multiple Choice

Consider the following to answer the question(s) below:
Suppose that data on labour productivity and unit labour costs were obtained for the retail industry from 1995 through 2014. A regression was estimated to describe the linear relationship between the two variables.
-Which of the following re-expressions of the data would be appropriate?

• A) Use a logarithmic transformation.
• B) Square the data.
• C) Use a geometric transformation.
• D) Take the square root of the data.
• E) Take the reciprocal of the data.

---

Definitions:

Stock of the Economy

An aggregate representation of the total value of all publicly traded companies within an economy.

Nominal Rate of Interest

The stated interest rate of a bond or loan without adjusting for inflation or other factors that affect the true cost of borrowing.

Real Rate of Interest

The interest rate that has been adjusted to remove the effects of inflation, showing the real earning power of an investment.

Inflation Rate

A situation where the overall cost of goods and services climbs, causing the value of money to diminish.