a. Write the regression model in words

b. Discuss the fitness of the multiple regression model.

c. Interpret each of the coefficients of the regression model (pay close attention to the binary variable?Political Regime as the interpretation is different from the slopes!).

d. Use a t-test for each variable and determine which variables are significant and the relationship direction (direct, indirect or no relationship).

e. Use a test of model significance.

f. Overall, does it seem as though these "consumption" variables have much of an impact on inflation? Do the coefficients take on the expected sign (i.e. direction of the relationship) that you would expect?

A B C D E F G H K L M N O Political Regime Average Average (Democra Price of a Price of a t = 0, Inflation Gallon of Import Gallon of Republica rate (%) milk Index Gas 7 = 1) SUMMARY OUTPUT 3.390 $ 3.19 100.00 $ 2.30 2.489 $ 3.08 102.38 $ 2.59 Regression Statistics 2.345 $ 3.50 105.60 $ 2.80 1 Multiple R 0.72 2.298 $ 3.80 111.99 $ 3.27 R Square 0.52 1.699 $ 3.11 106.74 $ 2.35 0 Adjusted R Square 0.33 0.959 $ 3.26 110.41 $ 2.79 0 Standard Error 0.43 1.659 $ 3.57 117.00 $ 3.53 0 Observations 15 2.110 $ 3.49 117.88 $ 3.64 0 1.763 $ 3.46 116.49 $ 3.53 0 ANOVA 1.750 $ 3.69 116.03 $ 3.37 0 df SS MS Significance F 1.829 $ 3.42 111.14 $ 2.45 0 Regression 4 2.05 0.51 2.74 0.09 2.211 $ 3.20 108.73 $ 2.14 o Residual 10 1.87 0.19 1.844 $ 3.23 110.15 $ 2.41 Total 14 3.92 2.140 $ 2.90 112.16 $ 2.74 2.192 $ 3.04 111.08 $ 2.64 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 7.31 1.37 1.67 0.1254 -2.43 17.06 2.43 17.06 Average Price of a Gallon of milk 0.18 0.63 0.29 0.7751 -1.22 1.59 -1.22 1.59 Import Index -0.06 0.04 -1.51 0.1616 -0.15 0.03 -0.15 0.03 Average Price of a Gallon of Gas 0.26 0.46 0.58 0.5735 -0.75 1.28 -0.75 1.28 Political Regime (Democrat = 0, Republican = 1) 0.41 0.28 1.48 0.1695 -0.21 1.03 -0.21 1.03