A Researcher Gathers Data on 25 Households and Estimates the Following

question 102

Multiple Choice

A researcher gathers data on 25 households and estimates the following model: Expenditure = β₀ + β₁ Income + ε.A residual plot of the estimated model is shown in the accompanying graph. Which of the following can be inferred from the residual plot?

• A) The residuals have little variation.
• B) The residuals do not exhibit any pattern.
• C) The residuals seem to fan out across the horizontal axis.
• D) The residuals are evenly distributed across the horizontal axis.

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Definitions:

Expansionary Policy

is a macroeconomic policy that aims to increase economic growth or reduce unemployment by increasing government spending, decreasing taxes, or both.

Excess Reserves

The amount of reserves held by a bank that exceeds the minimum reserve requirements set by the central bank.

Ability

Ability refers to the capacity or power of an individual or entity to do something effectively, often implying a skill or competence in a specific domain.

Currency

A system of money in general use in a specific country or region.