Definitions for GDP pp Data: This data set contains information on five variables pertaining to 62 individual countries in year 2014.

GDP pp: Gross Domestic Product per capita in $US

GINI: A measure of a nations income inequality, which takes a value between 0 and 100. A value of 100 implies perfect inequality.

CONSUM SPEND: consumer spending in $US

EXPORTS: exports in $US

IMPORTS: imports in $US

1) Estimate the following regression in R and present the regression result: GDP pp = 0 + 1GINI + 2CONSUM SP END + 3EXP ORT S + 4IMP ORT S + (1)

2) Carefully state the meaning of the estimated coefficients of GINI. Does the sign make sense to you? Make sure you explain your reasoning.

3) Report on the models goodness of fit. How well do you feel that your model fits your data?

4) Lets say that you decided to create an additional independent variable in where you sum the exports and the imports variables. If you then run the same regression as in 1, but also add the new variable, what Classical Assumption would you be violating? Explain your reasoning.

5) Set up formal one-sided hypothesis for the GINI and a two-sided hypothesis for CONSUM SPEND variables. Perform t-test analysis on GINI (one-sided) at 5% level of significance and CONSUM SPEND (two-sided) at 1% level of significance. Discuss the results of your hypothesis testing.