Of interest to many economists is the connection between mortgage interest rates and home sales. For a simple linear regression analysis attempting to link the mortgage interest rate (x) to new home sales (y), suppose the following data are available:
Show the data in a scatter diagram and use the least squares criterion to find the slope (b) and the intercept (a) for the best fitting line. Sketch the least squares line in your scatter diagram. Use the line to estimate the change in new home sales that would be associated with a 1% increase in the interest rate. Be sure to indicate whether the change would be positive or negative.

  • CreatedJuly 16, 2015
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