Fill in the blank parentheses - the monetarists maintain

Question

Question 1: You are given the following data based on 10 pairs of observations on Y and X.

Σy_i = 1110 ΣX_i = 1680 ΣX_iY_i = 204,200

ΣX_i² = 315,400 ΣY_i² = 133,300

Assuming all the assumptions of CLRM are fulfilled, obtain

a. b₁ and b₂.

b. standard errors of these estimators.

c. r².

d. Establish 95% confidence intervals for B₁ and B₂.

e. On the basis of the confidence intervals established in (d), can you accept the hypothesis that B₂ = 0?

Question 2: Based on data for the United States for the period 1965 to 2006, the following regression results were obtained:

GNP_t = -995.5183 + 8.7503M_1t   r² = 0.9488

se = (        )           (0.3214)

t = (- 3.8258)         (         )

where GNP is the gross national product ($, in billions) and M₁ is the money supply ($, in billions).

Note: M₁ includes currency, demand deposits, traveler's checks, and other checkable deposits.

a. Fill in the blank parentheses.

b. The monetarists maintain that money supply has a significant positive impact on GNP. How would you test this hypothesis?

c. What is the meaning of the negative intercept?

d. Suppose M₁ for 2007 is $750 billion. What is the mean forecast value of GNP for that year?

Question 3:  Table 3-6 gives data on X (net profits after tax in U.S. manufacturing industries [$, in millions]) and Y (cash dividend paid quarterly in manufacturing industries [$, in millions]) for years 1974 to 1986.

a. What relationship, if any, do you expect between cash dividend and after-tax profits?

b. Plot the scattergram between Y and X.

c. Does the scattergram support your expectations in part (a)?

cl. If so, do an OLS regression of Y on X and obtain the usual statistics.

e. Establish a 99% confidence interval for the true slope and test the hypothesis that the true slope coefficient is zero; that is, there is no relationship between dividend and the after-tax profit.

CASH DIVIDEND (Y) AND AFTER-TAX PROFITS (X) IN

U.S. MANUFACTURING INDUSTRIES, 1974-1986

Year	X		Year	Y	X
	($, in millions)			($, in millions)
1974	19,467	58,747	1981	40,317	101,302
1975	19,968	49,135	1982	41,259	71,028
1976	22,763	64,519	1983	41,624	85,834
1977	26,585	70,366	1984	45,102	107,648
1978	28,932	81,148	1985	45,517	87,648
1979	32,491	98,698	1986	46,044	83,121
1980	36,495	92,579