# ECO - Simple Regression Model

**KnowledgeCats**

**Consider the simple regression model Yt = a + b Xt + ut in which Yt is total expenditure on travel and Xt is total income for the t th State. Including the District of Columbia, you have data for 51 observations. Both variables are measured in billions of dollars. The following is a atrial computer output for the above data.**

**VARIABLE COEFFICIENT STDERROR**

**Constant 0.4981 0.5355**

** Income 0.0556 0.0033**

**Error Sum of Squares (ESS) 417.110**

**Total Sum of Squares (TSS) 2841.330**

**i) ****(5 points) What is the econometric interpretation of the estimated coefficient for income? Does the numerical value appear reasonable?**

**ii) ****(14 points) Test individually whether the coefficients for the constant term and income are significantly different from zero at the 5% level. Be sure to state the null and alternative hypotheses, the test statistic and its distribution, the critical value (or range), and the criterion. What is your conclusion?**

**iii) ****(3 points) Compute the measure of goodness of fit.**

**iv) ****(5 points) Compute the 95% confidence intervals for the intercept and the slope coefficient.**

- 7 years ago

**ECO - Simple Regression Model Solution**

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- eco_-_simple_regression_model.docx