Consider the Following to Answer the Question(s) Below

question 12

Multiple Choice

Consider the following to answer the question(s) below:
A regression model was developed relating average annual pay to the percentage of women employed for a sample of companies. Below is the plot of residuals versus predicted values.
-What does the plot of residuals suggest?

• A) The plot of residuals shows no unusual pattern. The Equal Variance assumption is satisfied.
• B) The plot of residuals has no particular structure. So, the Equal Spread condition is definitely satisfied.
• C) The spread in the residuals decreases as the fitted value increases.
• D) The residuals show that the plot thickens. The spread in the residuals increases as the fitted value increases. The equal spread condition is not satisfied.
• E) The spread in the residuals remains unchanged as the fitted value increases. The Equal Spread condition is satisfied.

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Definitions:

Discretionary Fiscal Policy

Government policy actions, such as changes in taxes and spending, aimed at stabilizing the economy that are initiated at the discretion of the government.

Stagflation

A condition of slow economic growth and relatively high unemployment accompanied by rising prices, or inflation, challenging the usual economic assumptions.

Permanent Income

A theory suggesting that an individual's consumption choices are based on their long-term income expectations rather than their current income.

Economic Decisions

Refers to choices made by individuals, businesses, or governments regarding allocation of resources to satisfy various needs and wants.