Question: pls help me with it Q5. (10 points) Consider the following two models that relate personal consumption (C), savings (S) and disposable personal income (Y):

pls help me with it

pls help me with it Q5. (10 points) Consider the following two

Q5. (10 points) Consider the following two models that relate personal consumption (C), savings (S) and disposable personal income (Y): Model 1: St = [30 + [3119+ ut; Model 2: C, = a0 + alYf + at. Using the US annual data for 19701995, we estimate the rst model (savings function) as E. =62.42 + 0. 0376 11; (12.76) (0.0042) standard errors of the estimated coefcients are given in parentheses. Note that C. = Yr St and the true coefcients in Model 2 are linear functions of the coefcients in Model 1. By replacing S, in Model 1 with Y. C. and rearranging the terms, we get YrC; = 0+ lYt'l' u, or Cr = o + (1 [31)Yr 11;. By matching this model to Model 2, we can see that do = o and (11 = 1131. Question. Use the estimated coefcients for [30 and [31 from the savings function to construct estimators of a0 and a1. Report a; and 6]\" and derive their standard errors

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