Personal Spending and Personal Income

question 37

Essay

Personal Spending and Personal Income
Is personal spending linearly related to orders for durable goods and personal income? A recent study reported the amounts of personal spending (in trillions of dollars), amount spent on durable goods (in billions of dollars), and personal income (in trillions of dollars). A statistical package was used to fit a linear regression model, producing the output below. R² = 95.9% R²(adj) = 95.0%, s = 0.0144 with 12 - 3 = 9 df.
-Refer to Personal Spending and Personal Income. Predict the level of personal spending when amount spent on durable goods is 130 and personal income is at 5.10.

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Definitions:

Price-Earnings Ratio

A valuation metric that compares a company's share price to its earnings per share.

Common Stock

Equity ownership in a corporation, with voting rights and potential dividends, but after bankruptcy claim priority behind preferred stock.

Market Price

The current price at which an asset or service can be bought or sold in a marketplace.

Return on Total Assets

A financial ratio that measures the profitability of a company in relation to its total assets, indicating how efficient management is at using its assets to generate earnings.