Question 1. A researcher wants to investigate the level of air pollution in a large city in relation to gasoline prices. Using the data from 1997 to 2018, the results are: OLS SRF estimates: Standard errors: Ý, = 32.4 - .496 X: (15.42) (0.144) R? = 0.831, Standard error of regression (S)3D0.512, n= 22

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Question 1. A researcher wants to investigate the level of air pollution in a large city in relation
to gasoline prices. Using the data from 1997 to 2018, the results are:
Ý, = 32.4 - 496 X
(15.42) (0.144)
OLS SRF estimates:
Standard errors:
R? = 0.831,
Standard error of regression (S) = 0.512,
n= 22
where
Y, =
the level of air pollution (in index points)
X: = gasoline prices (in S per gallon)
a. For this example, write the population regression function (PRF) and the sample regression
function (SRF). What are the population parameters in this example? What are the point
estimators in this example? Clearly explain.
b. Referring back to part (a), what are the two components of Y, in the population regression
function, and what are the two components of Y in the sample regression function? Explain
clearly how each component in the PRF relate to each component in the SRF.
c. Clearly interpret 32.4 and-.496.
d. Clearly interpret the coefficient of determination (R?).
e. Test whether gasoline prices explain the behavior of air pollution. In answering, write the null
and alternative hypotheses and the decision rule. Show your calculations. State your
conclusion.
f. State the assumption(s) that are needed for your answer to part (e) to be valid.
Transcribed Image Text:Question 1. A researcher wants to investigate the level of air pollution in a large city in relation to gasoline prices. Using the data from 1997 to 2018, the results are: Ý, = 32.4 - 496 X (15.42) (0.144) OLS SRF estimates: Standard errors: R? = 0.831, Standard error of regression (S) = 0.512, n= 22 where Y, = the level of air pollution (in index points) X: = gasoline prices (in S per gallon) a. For this example, write the population regression function (PRF) and the sample regression function (SRF). What are the population parameters in this example? What are the point estimators in this example? Clearly explain. b. Referring back to part (a), what are the two components of Y, in the population regression function, and what are the two components of Y in the sample regression function? Explain clearly how each component in the PRF relate to each component in the SRF. c. Clearly interpret 32.4 and-.496. d. Clearly interpret the coefficient of determination (R?). e. Test whether gasoline prices explain the behavior of air pollution. In answering, write the null and alternative hypotheses and the decision rule. Show your calculations. State your conclusion. f. State the assumption(s) that are needed for your answer to part (e) to be valid.
g. Calculate the 90% confidence interval estimate of the population parameter of gasoline prices.
Show your calculations. Interpret your result.
h. Calculate the 90% confidence interval estimate of error variance (o). Show your calculations.
Interpret your result.
i. Use your result in part (h) to explain whether you reject the claim that the true standard error
of regression is 0.45 against the alternative that it is bigger than 0.45. In answering this
question, write the null and alternative hypotheses.
j. State the assumption(s) that are needed for your answer to part (i) to be valid.
k. List the steps in regression analysis. Have we taken all these steps in this example? Explain
clearly.
Transcribed Image Text:g. Calculate the 90% confidence interval estimate of the population parameter of gasoline prices. Show your calculations. Interpret your result. h. Calculate the 90% confidence interval estimate of error variance (o). Show your calculations. Interpret your result. i. Use your result in part (h) to explain whether you reject the claim that the true standard error of regression is 0.45 against the alternative that it is bigger than 0.45. In answering this question, write the null and alternative hypotheses. j. State the assumption(s) that are needed for your answer to part (i) to be valid. k. List the steps in regression analysis. Have we taken all these steps in this example? Explain clearly.
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