4. (30 points) The following consumption function is estimated by using 20 observations: Ce = 400 + 0.84. R2 = 0.900, SSR = 1200 (40) (0.2) where C = Consumption, C=Y-S, Y= Income, S = Saving. Standard errors in parentheses. It is known that the consumption function satisfies the Gauss-Markov assumptions. A researcher attempts to estimate the following Saving (S) equations: S. = Yo + YY + U1 (2) S. = Bo + B.Y. + B2C + U2 a) Consider Model 1. Compute Y1, R2 and the sum of the squared residuals (SSR). b) Consider Model 2. Compute B1, B2, R2 and SSR. 2 c) It is argued that the SSRs from the saving functions (1) and (2) are the same. True, False, or uncertain? Explain. 4. (30 points) The following consumption function is estimated by using 20 observations: Ce = 400 + 0.84. R2 = 0.900, SSR = 1200 (40) (0.2) where C = Consumption, C=Y-S, Y= Income, S = Saving. Standard errors in parentheses. It is known that the consumption function satisfies the Gauss-Markov assumptions. A researcher attempts to estimate the following Saving (S) equations: S. = Yo + YY + U1 (2) S. = Bo + B.Y. + B2C + U2 a) Consider Model 1. Compute Y1, R2 and the sum of the squared residuals (SSR). b) Consider Model 2. Compute B1, B2, R2 and SSR. 2 c) It is argued that the SSRs from the saving functions (1) and (2) are the same. True, False, or uncertain? Explain