# Question

John Maynard Keynes hypothesized that household income was the primary determinant of household spending. To test his theory, 9 regions were selected within the United States based upon average disposable income levels.

The scale income levels for these regions were 0.5, 1.0, 1.5, 2.0, 2.5, 3.0, 3.5, 4.0 and 5.0. Per capita household spending was recorded for each region. The results are given in Table 1.

1. Verify that the least square regression line for predicting consumer spending from income is:

2. Verify that the correlation coefficient between consumer spending and income is 0.9234.

3. The analysis of variance table is of the form:

4. What is the percentage of variation in consumer spending that is explained by income?

5. Compute the standard error of the estimated regression line and interpret.

6. Compute the predicted spending when income is 0, 3, 5, and 6 units.

7. Plot the data and comment on the use of the linear model to fit this data.

8. Consider the following data set where Y represents per capita household spending expressed in terms of year 31 dollars and X is disposable income after taxes.

a. What would be the effect upon consumer spending if Congress introduces a tax cut in year 32 that increases per capita disposable income by $100?

b. How would consumer spending in year 32 been effected by a tax increase that would have lowered per capita disposable income by $100?

The scale income levels for these regions were 0.5, 1.0, 1.5, 2.0, 2.5, 3.0, 3.5, 4.0 and 5.0. Per capita household spending was recorded for each region. The results are given in Table 1.

1. Verify that the least square regression line for predicting consumer spending from income is:

2. Verify that the correlation coefficient between consumer spending and income is 0.9234.

3. The analysis of variance table is of the form:

4. What is the percentage of variation in consumer spending that is explained by income?

5. Compute the standard error of the estimated regression line and interpret.

6. Compute the predicted spending when income is 0, 3, 5, and 6 units.

7. Plot the data and comment on the use of the linear model to fit this data.

8. Consider the following data set where Y represents per capita household spending expressed in terms of year 31 dollars and X is disposable income after taxes.

a. What would be the effect upon consumer spending if Congress introduces a tax cut in year 32 that increases per capita disposable income by $100?

b. How would consumer spending in year 32 been effected by a tax increase that would have lowered per capita disposable income by $100?

## Answer to relevant Questions

Your immediate supervisor, Rhonda Waters, has raised the possibility of switching from a chase demand strategy to a level-capacity strategy for aggregate planning and wants your opinion on the merits of one versus the other. ...a. Given the SWOT analysis presented in the case, what are IKEA's key competitive advantages? What strategic focus should the company take as it looks to further expand into the U.S. market?b. What factor is the biggest ...Find the IRR of a project that returns $17,000 three years from now if it costs $12,000. Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, and 5% are informed traders. The portfolio consisting of all informed traders has a beta of 1.4 and an alpha of 3.82%. The ...On January 1, 2000, Rye Co. established a stock appreciation rights plan for its executives. They could receive cash at any time during the next four years equal to the difference between the market price of the common stock ...Post your question

0