Question: Question 3. (20 marks) a) Assume the following regression model: = 0 + 1 + 2 + 3 + , where is personal consumption expenditure,

Question 3. (20 marks)

a) Assume the following regression model: = 0 + 1 + 2 + 3 + , where is personal consumption expenditure, is personal income, and is personal wealth. (i) What is the partial effect of on ? (ii) What is the partial effect of on ? (iii) How would you test the hypothesis that the marginal propensity to consume (i.e., 1 ) is independent of the wealth of the consumer?

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