NXA 165.3 -0.0276GDP-0.8372ERATE se (50.9) (0.005) (0.425) N 29, R-squared-0.54
ID: 3322016 • Letter: N
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NXA 165.3 -0.0276GDP-0.8372ERATE se (50.9) (0.005) (0.425) N 29, R-squared-0.54 - real net exports (S billion), GDP real GDP (S billion), and ERATE index of the US real exchange te: an increase in ERATE means an appreciation of the US currency Interpret the slope coefficients. (3 points) . If the ERATE -130, what is the predicted change in net exports of a 10 percent deprec things remaining constant? (2 points) By how much would GDP have to change to prevent net exports from changing in response to the 10 Pe depreciation of the US currency? (3 points) rcent C. Test whether the exchange rate has an impact on net exports. Specify the alternative according to theory Use 5% significance level. (2 points) Question 4 relationship between the demand for each of five goods and family income is given by a-A + INCOME e Here Q is the demand for a good by household i, and INCOME is the income of household i. The goods are grouped under 4 categories: food (FOOD), health (HEALTH), recreation and reading (REC), and alcoholic beverages (B002) variables are in dollars. The table below gives the estimates of the model for each good . Al De Food Health Booz 716.0 368.12 831.65 588.77 Rec Constant Income (s.e) Means 02980 0.0429 0.1073 0.0321 0011 0.09 13,589 $1,789$2,722 $1,643 (00007)- 0.0016) 0.36 0.64 0.33 Income: $33, 132 A. Interpret the estimated slope coefficients. (3 points) B. At the 5 percent level, test whether the slope coefficients in the food and recreation regressions are significantly different from zero. Specify the alternative to your prior expectations. (3 points) C. The income elasticity of luxury goods is often thought to be greater than 1, while that of necessities is predicted to be less than 1. In this regard, classify the goods according to whether they are luxuries or necessities. Answer this by estimating elasticity at the means. (4 points) 8 (30 points): Answer any two land only two) question. Each is worth 15 points. tion 1 Parts A, B and C are unrelated uarthe model: Y.A+Bex, + Axa + .Xa + e. You want to test the linear restriction Ba + ,-A·O·Explain how uld go about conducting this test if you cannot get the covariances of the OLS estimators. (5 points) earcher obtained the following sample regression for Canada from 13 annual observations on the annual rate tation (%) y and the unemployment rate (%) x: 5.8-0.62x rpret each of the estimated parameters. (2 points). e current rate of unemployment is 10%, what is the predicted impact on the inflation rate of a percent increase in X (b) 2 percentage point increase in X (3 points)Explanation / Answer
Answer to the question is as follows:
NX^ = 165.3 -.0276*GDP - 0.8372*ERATE
a. the slope coefficient is interpreted as :
Per increase in the GDP, NX^ decreases by .0276
Per increase in the ERATE, NX^ decreses by .8372
b. NX^ = 165.3 - .8372*130 = 56.464,GDP remains constant
An decrease in ERATE = 10% means a increase in NX^ by .8372*10 = 8.732. To counter this GDP must increase by 8.732/.0276 = 316.38 units
c.
The
Ho: ERATE Coefficient = 0
Ha: ERATE Coefficient != 0
test statistic = t = Beta- 0 /SE = (-.8372-0)/.425 = -1.97
The P-Value is .029401.
The result is significant at p < .05.
Hence, ERATE or the exchange rate has an impact on the net exports.
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