You Have Collected Data for Real GDP (Y)and Have Estimated

question 31

Essay

You have collected data for real GDP (Y)and have estimated the following function:
ln t = 7.866 + 0.00679×Zeit
(0.007)(0.00008)
t = 1961:I - 2007:IV,R2 = 0.98,SER = 0.036
where Zeit is a deterministic time trend,which takes on the value of 1 during the first quarter of 1961,and is increased by one for each following quarter.
a.Interpret the slope coefficient.Does it make sense?
b.Interpret the regression R2.Are you impressed by its value?
c.Do you think that given the regression R2,you should use the equation to forecast real GDP beyond the sample period?

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