QUESTION#1

(a)

15000
10000
5000
0

1960 1970 1980 1990 2000 2010

Year

NGDP RGDP

(b)

Y=β1+β2X+µ
For nominal GDP:
NGDP= -496267.5+252.5763year+µ
For real GDP:
RGDP= -351334.7+180.2631year+µ
 (c)
Interpretation of the regression results:
For NGDP:

Interpretation of the intercept:

The estimated value of the intercept is -496867.5. This value implies that when year is zero,
nominal GDP will be 0. Which doesn’t make any sense as the nominal GDP of the country
can never be zero.
Interpretation of the slope coefficient:
The estimated value of the slope coefficient is 252.5763. This value implies that when the
time is increased by 1 the NGDP would be increased which make logical sense as the as the
NGDP of the country is increasing with the passage of time.
For RGDP:
Interpretation of the intercept:
The estimate value of the intercept is -351334.7. This value implies that when year is zero, RGDP is
negative. This does not make any logical sense as a country’s RGDP cannot be negative and years
cannot be zero.

Interpretation of the slope coefficient:

Estimated of the slope coefficient is 180.2631. This Values implies that when Year is increased by 1,
RGDP would increase by 180.2631 million dollars. This make logical sense as it suggests that the
country RGDP is increasing by the passage of time.
QUESTION#2
(a)
Interpretation of the Intercept.

The estimate value of the intercept is 0.2033. This value implies that when labor force participation
rate of women in 1968 is zero, labor force participation rate of women in 1972 is 0.2033. This does
not make any logical sense as labor force participation rate of women in 1972 is 0.2033, while the
labor force participation rate of women in 1968 is zero.

Interpretation of the Slope Coefficient.

The estimate value of the slope coefficient is 0.6560. This value implies that when labor force
participation rate of women in 1968 is increased by 1%, Labor force participation of women in 1972
would increase by 0.6560%. This makes logical sense that if you increase the labor force
participation of women previously (i.e. in 1968), so it automatically has an effect in the increase of
future labor force participation of women (i.e. in 1972).

(b)

T-statistics = B2 – B2 / Se (B2) = 0.6560 – 0 / 0.1961 = 3.345

α = 0.05

df = 17

Rejection Rejection
Acceptance

-2.11 +2.11
As the t-stat is 3.345 so we would reject the null hypothesis at 5% level of significance.
(c)
Interpretation of R-squared.
The estimated value of R-squared is 0.397. This value indicates that 39.70% variation in labor force
participation rate of women in 1972 is being explained by the model. This value is low and not close
to 1, it indicates that the model has not a good fit.

(d)
Ho: B2 = 1

H1: B2 ≠ 1

T-Statistic = 3.345

α = 0.01

df=17

Rejection Acceptance Rejection

-2.898 +2.89
8

As the value of t-stat is 3.345 so we would reject the null hypothesis at 1% level of significance.
QUESTION#3

(a)

40000
35000
30000
25000
20000

2000 4000 6000 8000

SPENDING

SALARY Fitted values

(b)

Variable Obs. Mean Std. Dev. Min Max

SALARY 51 24356.22 4179.426 18095 41480

SPENDING 51 3696.608 1054.761 2297 8349

(c)

SALARY SPENDING

SALARY 1.0000

SPENDING 0.8347 1.0000

(d)
Y = β1 + β2X + µ

Salary = 12129.37 + 3.307585 Spending + µ

Interpretation of the Intercept

The estimate value of the intercept is 12129.37. This value implies that when Spending is zero,
Salary is 12129.37. This does not make any logical sense as pupil spending cannot be zero.
Interpretation of the Slope coefficient

The estimate value of the slope coefficient is 0.2106616. This value implies that when the salary
is increase by $1, the spending would increase by $0.2106616. This makes logical sense as the
spending of a person is depended on the salary that he/she is getting.

(e)
Source | SS DF. MS Number of obs. = 51

-------------+------------------------------ F (1, 49) = 112.60

Model | 38759153.9 1 38759153.9 Prob > F = 0.0000

Residual | 16866844.2 49 344221.311 R-squared = 0.6968

-------------+------------------------------ Adj R-squared = 0.6906

Total | 55625998.2 50 1112519.96

Analysis of variance (ANOVA) is a statistical technique that is used to check if the means of two
or more groups are significantly different from each other. ANOVA checks the impact of one or
more factors by comparing the means of different samples.

We can use ANOVA to prove/disprove if all the medication treatments were equally effective or
not.

(f)
Ho: B1 = 0
H1: B1 ≠ 0

The P-value of the slope coefficient is 0.000, therefore the slope coefficient is significant at 5%
level of significance.

(g)
Ho: B1 = 1
H1: B1 ≠ 1

SPENDING | Coef. Std. Err. t P>|t| [99% Conf. Interval]

(1) | -.7893384 .0198526 -39.76 0.000 -.8425424 -.7361344

We conclude that P-value is less than 0.01 so we reject the null hypothesis at 1% level of
significance.
QUESTION#4

(a)

200.00
150.00
100.00
50.00

80.00 100.00 120.00 140.00 160.00

PPI

CPI Fitted values

(b)
Y = β1 + β2X + µ

PPI = 45.71298 + .5421618 CPI + µ

Interpretation of the Intercept.

The estimate value of the intercept is 45.71298. This value implies that when CPI is zero, PPI is
45.71298. This does not make any logical sense because CPI cannot be zero.

Interpretation of the Slope coefficient.

The estimate value of the slope coefficient is 0.5421618. This value implies that when the CPI is
increase by $1, the PPI would increase by $0.5421618. This makes logical sense as the PPI is
depended on CPI.

(c)
T-TEST

Ho: B1 = 0
H1: B1 ≠ 0

T-Statistic = 23.69
 α = 0.01

df=25

Rejection Acceptance Rejection

-2.787 +2.787

T=23.69

We reject the null hypothesis at the 1% level of significance.

Confidence interval 99%.

R.R Acceptance R.R

Ho: B1 = 0

40.3349 51.0906
 So we reject the null hypothesis using confidence interval by 1% level of significance.

(d)

Ho: Errors are normally distributive.

Shapiro-Wilk W test for normal data

Variable| Obs. W V z Prob>z

U | 27 0.98474 0.449 -1.647 0.95020

QUESTION#5

(a)

Summarize

Variable| Obs. Mean Std. Dev. Min Max

Y | 31 10.64613 2.351515 6.92 16.17
X2 | 31 4.449677 .8135334 3.39 6.12
X3 | 31 7.524839 1.126851 5.05 9.18
X4 | 31 882.789 271.354 487.67 1385.1
X5 | 31 16 9.092121 1 31

Correlate (obs. =31)

| Y X2 X3 X4 X5
Y | 1.0000
X2 | 0.1352 1.0000
X3 | -0.4266 -0.3054 1.0000
X4 | -0.5574 0.1820 0.8271 1.0000
X5 | -0.5299 0.1609 0.8481 0.9906 1.0000

(b)

Y = β1 + β2X2 + β3X3 + β4X4 + β5X5 + µ

Y = -9.854596 + 2.701012 X2 + 3.059605 X3 + -.0160601 X4 + -.0227015

INTERPRETATION

Interpretation of the intercept

The estimate value of the intercept is -9.854596. This value implies that when price of the
wellhead in the previous period, domestic output, GNP in dollars, trend variable are equal to
zero, then the no. of oil wells drilled becomes negative. This does not make any logical sense
 because the no. of oil wells drilled cannot be negative and the wellhead in the previous period,
domestic output, GNP in dollars, trend variable cannot be equal to zero.

Interpretation of the partial slope coefficient of X2

The estimate value of the coefficient of the X2 is 2.701012. This value implies that when the
price of the well head in the previous period is increased by $1, then the no. of oil wells drilled
would increase by 2.701012. This makes logical sense as the increase in the price of well head in
the previous year suggest to drill the oil well, because wellhead provide pressure seals for the
casing string from the bottom to control the pressure equipment.

Interpretation of the partial slope coefficient of X3

The estimate value of the coefficient of the X3 is 3.059605. This value implies that when the
domestic output is increased by 1 unit, then the no. of oil wells drilled would increase by
3.059605. This makes logical sense as the increase in the units of domestic output (i.e. barrels
per day) is possible due to increase in the oil well drilled.

Interpretation of the partial slope coefficient of X4

The estimate value of the coefficient of the X4 is -0.0160601. This value implies that when the
gross national product increased by $1, then the no. of oil wells drilled would decreased by
0.0160601. This makes logical sense because there is oil crises in 1973 and due to this GNP
decreases the no. of oil wells drilled.

Interpretation of the partial slope coefficient of X5

The estimate value of the coefficient of the X5 is -0.0227015. This value implies that when the
trend variable is increasing year to year, then the no. of oil wells drilled would decreased by
0.0227015. This makes logical sense because there is oil crises in 1973 and due to this no. of oil
wells drilled would decreased.

(c)

Ho: B1 = B2 = B3 = B4 = F-Statistics = 8.99

B5 = 0 α = 0.05

df = 26

Critical value = 2.7426

Acceptance
 (d)

Interpretation of the Adjusted R-Squared

The value of the Adjusted R-squared is 0.5158. This value shows the 51.58% variation in no. oil
well drilled is being explained by the model. This value is neither too high nor low, so the fitness
of the model is average fit.

(e)

Ho: Errors are normally distributive.

Shapiro-Wilk W test for normal data

Variable| Obs W V z Prob>z

W | 31 0.97204 0.911 -0.194 0.57690

QUESTION#6

(a)
Summarize
(b) Variable| Obs Mean Std. Dev. Min Max
(c) Y | 20 83.86 28.97771 49.6 162.1
(d) X2 | 20 1358.1 723.3162 560.3 2937.7
(e) X3 | 20 6.2875 6.284021 .6 18
(f) X4 | 20 29.145 13.99994 16 68.9
(g) X5 | 20 .4 .5026247 0 1

Correlate (obs. = 20)

(h) X | Y X2 X3 X4 X5
(i) Y | 1.0000
(j) X2 | 0.9521 1.0000
(k) X3 | 0.8012 0.8965 1.0000
(l) X4 | 0.9802 0.9457 0.8157 1.0000
(m) X5 | -0.3483 -0.5188 -0.6424 -0.4066 1.0000

(b)

Y = β1 + β2X2 + β3X3 + β4X4 + β5X5 + µ

Y = 19.44345 + 0.0180564 X2 + -0.2842198 X3 + 1.343195 X4 + 6.331794 X5

INTERPRETATIONS
 Interpretation of the intercept

The estimate value of the intercept is 19.44345. This value implies that GNP for year t, in
billions, US military sales /assistance in year t, in billions, aerospace industry sales in billions
,military conflicts involving more than 100,000 troops are equal to zero, then defense budget-
outlays for Year T, in billions is 19.44345. This does not make logical sense because GNP for year t, in
billions, US military sales /assistance in year t, in billions, aerospace industry sales in billions,
military conflicts involving more than 100,000 troops cannot be equal to zero.

Interpretation of the partial slope coefficient X2

The estimate value of the coefficient of X2 is 0.0180564. This value implies that GNP for Year T, in
billions is increased by $1, then the Defense Budget-Outlays for Year T, $/Billions would increase by
0.0180564. This makes logical sense as the gross national product of the country is increasing than the
govt. also increase the budget of Defense.

Interpretation of the partial slope coefficient X3

The estimate value of the coefficient of X3 is 0.2842198. This value implies that U.S. Military
Sales/Assistance in Year T, $/Billions is increased by $1, then Defense Budget-Outlays for Year T, $/Billions
would increase by 0.2842198. This makes logical sense as the Military sales is increasing than it directly
affect the budget of the Defense outlay.

Interpretation of the partial slope coefficient X4

The estimate of the coefficient of X4 is 1.343195. This value implies that Aerospace Industry Sales,
$/Billions is increased by $1, then Aerospace Industry Sales, $/Billions would increase by 1.343195. This
makes logical sense as the Aerospace industry sales is increasing than it also contribute in the Defense
outlays budget.

Interpretation of the partial slope coefficient of X5

The estimate of the coefficient of X5 is 6.331794. This value implies that Military Conflicts Involving More
Than 100,000 Troops is increased by 1, then Defense Budget-Outlays for Year T, $/Billions would increase
by 6.331794. This makes logical sense as the Military conflicts involving is increased than the Defense
budget also increased to resolve the conflicts.

(c)

T-TEST

H0:B2 = 1

H1: B2 ≠ 1

T-Statistic = -153.17

α = 0.05

df = 15

Critical value = 1.708

 T-Stat = -153.17

Rejection Rejection

-1.753 +1.753

So we reject the null hypothesis using confidence interval by 5% level of significance.

H0:B3 = 1

H1: B3 ≠ 1

T-Statistic = -2.81

α = 0.05

df = 15

Critical value = 1.708

T-Stat = -2.81

Rejection Rejection

-1.753 +1.753

So we reject the null hypothesis using confidence interval by 5% level of significance.

CONFIDENCE INTERVAL (95%)

RR Acceptance RR

Ho: B2 = 1

.0043922 .0043922

So we reject the null hypothesis at 95% level of confidence interval.

CONFIDENCE INTERVAL (95%)

RR Acceptance RR

Ho: B3 = 1

-1.25889 .6904507

So we reject the null hypothesis at 95% level of confidence interval.

(d)

Ho: B1 = B2 = B3 = B4 = B5 = 0

F-Statistics = 163.72

α = 0.05

df = 15

Critical value = 3.0556

F- Stat = 163.72

Acceptance

3.0556
So, we reject the null hypothesis at the 5% level of significance.

(e)

Interpretation of the Adjusted R-Squared

The value of the Adjusted R-squared is 0.9716. This values shows the 97.16% variation in defense
budget-outlays for Year T, in billions is being explained by the model. This value is too high, so the
fitness of the model is very good.

(f)
 Shapiro-Wilk W test for normal data

Variable | Obs W V z Prob>z

W | 20 0.89822 2.409 1.772 0.03819

QUESTION#7
(a)
Variable | Obs Mean Std. Dev. Min Max

X2GNP | 16 1287.0 169.4772 1051.8 1535.4

X3Housing | 16 1576.3 400.4189 1039 2360.8

X4Unemplo | 16 6.3875 1.719641 3.5 9.2

X5PrimeRat | 16 9.6375 4.222618 5.4 17.5

X6Customer| 16 3.893 1.291753 .6 5.9

YAnnualSal | 16 7543.1 1217.152 5020 9400

Correlate (obs. =16)

| X2GNP X3Hous X4Un X5Prim X6Cust YAnnual

X2GNP | 1.0000

X3Housing | -0.3496 1.0000

X4Unempl | 0.7266 -0.4633 1.0000

X5PrimeR | 0.8099 -0.7487 0.7009 1.0000

X6Customer| -0.6743 0.6062 -0.8089 -0.8308 1.0000

YAnnualSal | 0.2103 0.4972 -0.2635 -0.0504 0.0108 1.0000

(b)

Y = β1 + β2X2 + β3X3 + β4X4 + β5X5 + β6X6+ µ

 Y = 5962.656+ 4.883663 X2 + 2.363956X3 + -819.1287X4 + 12.01048X5+ -851.3927X6+

INTERPRETATION
Interpretation of the intercept
The estimate value of the intercept is 5962.656. This value implies that GNP in billions, Housing starts,
Unemployment rate, and Prime rate lagged 6 months and Customer line gains are equal to zero, then
the Annual sales in MPF, million paired feet is 5962.656. This does not make logical sense that the GNP
in billions, Housing starts, Unemployment rate, Prime rate lagged 6 months and Customer line gains
cannot be zero.

Interpretation of the partial slope coefficient of X2

The estimate value of the slope coefficient of X2 is 4.883663. This value implies that the GNP in billion is
increased by $1, then the Annual sales in MPF would be increased by 4.883663. This makes logical sense
as the govt. national product is increasing then it directly affect the annual sales in MPF.

Interpretation of the partial slope coefficient of X3

The estimate value of the coefficient of X3 is 2.363956. This value implies that Housing starts is increase
by $1, then the Annual salary (MPF0 would be increase by 2.363956. This makes logical sense as housing
starts is increases then automatically annual sales in MPF sill increase.

Interpretation of the partial slope coefficient of X4

The estimate value of the coefficient is -819.1287. This value implies that the Unemployment rate is
increase by $1 then annual sales in MPF would decrease by -819.1287. This makes logical sense as the
annual sales would decrease if the unemployment rate increases.

Interpretation of the partial slope coefficient of X5

The estimate value of the coefficient is 12.01048. This value implies that the prime rate lagged 6 months
is increase by 1 then the annual sales in MPF would increase by 12.01048. This makes logical sense as
the prime rate lagged 6 months increases then it affects the annual sales in MPF.

Interpretation of the partial slope coefficient of X6

The estimate value of the coefficient is -851.3927. This value implies that the customer line gains
increase by $1 then annual sales in MPF would decrease by -851.3927. This makes logical sense as
customer line gains increasing then the annuals sales in MPF would be affected.
 (c)

H0:B2 = 1

H1: B2 ≠ 1

T-Statistic = 1.55

α = 0.05

df = 10

Critical value = 2.228

T-statistics = 1.55

Acceptance

Rejection Rejection

-2.228 +2.228

So we accept the null hypothesis at 5% level of significance.

H0:B3 = 1

H1: B3 ≠ 1

T-Statistic = 1.62

α = 0.05

df = 10

Critical value = 2.228

T-statistics = 1.62

Acceptance

Rejection Rejection

-2.228 +2.228

So we accept the null hypothesis at 5% level of significance.

CONFIDENCE INTERVAL (95%)

RR Acceptance RR

Ho: B2 = 1

-.7146299 10.48196

So we accept the null hypothesis at 95% level of confidence interval.

CONFIDENCE INTERVAL (95%)

RR Acceptance RR

Ho: B3 = 1

0.4843904 4.243522

So we accept the null hypothesis at 95% level of confidence interval.

(d)

Ho: B1 = B2 = B3 = B4 = B5 = 0

F-Statistics = 9.28

α = 0.05

df numerator = 5

df denominator = 10

Critical value = 5.6363

 F-Statistic = 9.28

Acceptance

5.6363

So we reject the null hypothesis at 5% level of significance.

(e)

Interpretation of the Adjusted R-Squared

The value of the Adjusted R-squared is 0.7341. This value shows the 73.41% variation in annual
sales in MPF, million paired feet is being explained by the model. This value is high, so the fitness
of the model is good.

(f)

Shapiro-Wilk W test for normal data

Variable| Obs W V z Prob>z

W | 16 0.951 0.992 -0.015 0.50598