A researcher wants to know how consumption spending responds to changes in disposable income. The researcher obtains 25 observations of consumption and disposable income from the national accounts of the country. After looking at a scatter plot of consumption and disposable income, the researcher finds the linear regression model to be appropriate and estimates the model: y = a + bx + e and obtains the following results;
y = 60+0.7x
se(b) = 0.3
se(a) = 15
adj-R2 = 0.90
a. Interpret the slope in the context of the problem.
b. Evaluate the overall fit of the model.
c. By how much would consumption increase if disposable income rises by 10 dirhams? What happens to the rest of the increase in disposable income?
d. Predict the level of consumption if disposable income is 80,000
e. Interpret the constant term.