Assume That You Had Data for a Cross-Section of 100

question 61

Essay

Assume that you had data for a cross-section of 100 households with data on consumption and personal disposable income. If you fit a linear regression function regressing consumption on disposable income, what prior expectations do you have about the slope and the intercept? The slope of this regression function is called the "marginal propensity to consume." If, instead, you fit a log-log model, then what is the interpretation of the slope? Do you have any prior expectation about its size?

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Definitions:

Life Expectancy

Life Expectancy is the average number of years that a person can expect to live, often used as a statistical measure to indicate the health status of a population.

U.S. Citizens

Individuals who have nationality or citizenship in the United States of America, either by birth or naturalization.

European Americans

Individuals living in the United States who are of European descent or origin.

Hispanic Americans

Refers to people in the United States who are descendants of individuals from Hispanic countries in Latin America and Spain.