The United Nations Development Programme (UNDP) collects data in the developing world to help countries solve global and national development challenges. In the UNDP annual Human Development Report, you can find data on over 100 variables for each of 197 countries worldwide. One summary measure used by the agency is the Human Development Index (HDI), which attempts to summarize in a single number the progress in health, education, and economics of a country. In 2012, the HDI was as high as 0.955 for Norway and as low as 0.304 for the Congo and Niger. The gross domestic product per capita (GDPPC), by contrast, is often used to summarize the overall economic strength of a country. Is the HDI related to the GDPPC? Here is a scatterplot of HDI against GDPPC.

a) Explain why fitting a linear model to these data would be misleading.
b) If you fit a linear model to the data, what do you think a scatterplot of residuals versus predicted HDI will look like?
c) There are two outliers, Qatar and Luxembourg with very high GDPPC€™s and Equitorial Guinea with a very low HDI for its GDPPC. Will setting these points aside improve the model substantially? Explain.

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