# Question

The following model was fitted to observations from 1972 to 1979 in an attempt to explain oil-pricing behavior:

Where

y` = difference between price in the current year and price in the previous year, in dollars per barrel

x1 = difference between spot price in the current year and spot price in the previous year

x2 = dummy variable taking the value 1 in 1974 and 0 otherwise to represent the specific effect of the oil embargo of that year

The numbers in parentheses under the coefficients are the estimated coefficient standard errors. Interpret verbally and graphically the estimated coefficient on the dummy variable.

Where

y` = difference between price in the current year and price in the previous year, in dollars per barrel

x1 = difference between spot price in the current year and spot price in the previous year

x2 = dummy variable taking the value 1 in 1974 and 0 otherwise to represent the specific effect of the oil embargo of that year

The numbers in parentheses under the coefficients are the estimated coefficient standard errors. Interpret verbally and graphically the estimated coefficient on the dummy variable.

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