Suppose you want to study the relationship between city GDP and how many companies are operated by government using a single regression 〖ln⁡(GDP)〗_i =8.5+ 0.013〖govc〗_i + u_i. Govc means the number of companies operated by government in the city.Before you do anything, interpret the slope coefficient.If one city has 5 government operated companies, predict the GDP. (answer the GDP that is not logged)Now assume the standard error of β_0 (intercept) is 2, standard error of β_1 (slope) is 0.01, and the sample size is n=200, write down and explain the steps of conducting significance test by hand for the estimated coefficient on 〖govc〗_i in detail. What does the test result imply? If the sample size is n=25, a very small sample size, standard error of β_1 (slope) is still 0.01, will your steps change? Suppose your fail to reject the hypothesis in question 3). Apply the null hypothesis i.e. the parameter equals to the number in your null, show that R^2=0 in this case. What does it imply?

A regression model is a method in statistics that is used to assess the association between any…

Answered: Suppose you want to study the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose you want to study the relationship between city GDP and how many companies are operated by government using a single regression 〖ln⁡(GDP)〗_i =8.5+ 0.013〖govc〗_i + u_i. Govc means the number of companies operated by government in the city.
- Before you do anything, interpret the slope coefficient.
- If one city has 5 government operated companies, predict the GDP. (answer the GDP that is not logged)
- Now assume the standard error of β_0 (intercept) is 2, standard error of β_1 (slope) is 0.01, and the sample size is n=200, write down and explain the steps of conducting significance test by hand for the estimated coefficient on 〖govc〗_i in detail. What does the test result imply? If the sample size is n=25, a very small sample size, standard error of β_1 (slope) is still 0.01, will your steps change?
- Suppose your fail to reject the hypothesis in question 3). Apply the null hypothesis i.e. the parameter equals to the number in your null, show that R^2=0 in this case. What does it imply?

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