# 1 a

)
b)

R = SSay/SSaaSSyy = 0.8696
b = SSay/SSaa =1.1
c = y – bA = -4
Yi = -4 + 1.1Ai

c) -4 + 1.1(70) = 73
if you use the equation but if you use your intuition and you see that at age 60 the income starts to
drop again therefore income at 70 would probably be less than 50 and intuitively this would be due
to retirement.
2 a)

CI = [b_hat - t(n-2)*se, b_hat + t(n-2)*se] = 0.4472007, 0.8247993
i)
ii)
iii)

Ho : B2 = 0
H1 : B2 not = 0
t crit = t 35, 0.05/2 = 2.0301

Rejection region
T < -2.0301
T > 2.0301

iv)

we reject the null hypotheses because the T H0 is greater that T crit

c) R^2 = 0.2763
d) The Models functional form should be changed; if you look at the residual plot the u
shape of the residuals suggests that there is a relationship other than a linear one between the
variables.
3.
Source

A)

SS

df

MS

Model
Residual

79.1208602
466.593426

1
5

79.1208602
93.3186851

Total

545.714286

6

90.952381

w

Coef.

b
_cons

.2892977
73.6583

Std. Err.
.3141838
10.20055

t
0.92
7.22

Therefore; Wi = 73.6583 + 0.2892977Bi + ei
a = 73.6583
b = 0.2892977
R squared = 0.1450

Number of obs
F( 1,
5)
Prob > F
R-squared
Root MSE

P>|t|
0.399
0.001

=
7
=
0.85
= 0.3994
= 0.1450
= -0.0260
= 9.6602

[95% Conf. Interval]
-.5183375
47.43695

1.096933
99.87966

648299 -7. ttest b==0 One-sample t test Variable Obs Mean b 7 30.9247 6.75 80 85 90 95 B) 10 20 30 b 40 Fitted values 50 w C) .050388 Therefore residuals the largest residuals are Boston: . predict res. A) i) units of measurment: prpblck.9816579 Income.49829 -.70673 mean = mean(b) Ho: mean = 0 Ha: mean < 0 Pr(T < t) = 0.644862 8.453517 -11. Err. [95% Conf. D) 1/0.3899 6 Ha: mean > 0 Pr(T > t) = 0.1134864income mean: 47053.11. Dev.1824165 income SD: 13179.29 .55234 18. \$ 15919 .4983 and Milwauke +9.0007 41.31571 Std. 4.6483 4.74434 Std.1867665 -6.822286 9.4566469 E) .136529 i) prpblck mean: 0.0003 Therefor we do not reject the null hypothesis.78 ii) prpblck SD: 0.2892977 = 3. Interval] 12.9997 t = degrees of freedom = Ha: mean != 0 Pr(|T| > |t|) = 0. % of black people: 0 – 0. r Team Baltimore Boston Cleveland Detroit Milwaukee New York Toronto res 8.

Dev.1134864 47053.0260006 3.29 Min Max 0 15919 .08611 P>|t| [95% Conf.1134864 47053.42 4.95146493 2 398 .0642 Sample size = 401 Variable Obs Mean prpblck income 409 409 .9816579 136529 Min Max 0 15919 .9936568 C) The coefficient is smaller in this simple regression because income and prpblck have a negative relationship and therefor this regression captures the effects of both the income and the prpblck in the prpblck variable.43 50.000 0.1149882 1.1824165 13179.35 Number of obs F( 2.007885043 psoda Coef. prpblck income _cons .62e-07 .78 Std.000 0.9816579 136529 B) Psoda = 0. .91e-07 . .007415741 Total 3.1824165 13179.60e-06(income) + u R^2 = 0.018992 t 4.60e-06 .31e-06 . Dev. reg psoda prpblck income Source SS df MS Model Residual .9189824 . Interval] 0.9563196 + 0.15401715 400 .0595 .0638724 8.202552215 2. Holding income constant larger and more accurate corelation between prpblck and psoda.1149882(prpblck) + 1. .101276107 . summ prpblck income Variable Obs Mean prpblck income 409 409 . you can see this is also reflected in the r – squared value although both are low the previous regression produced a higher r – squared value. . ..66 0.0642 0.1661039 2. 398) Prob > F R-squared Adj R-squared Root MSE = = = = = = 401 13.0000 0.000 .78 Std.29 .9563196 Std. Err.

0765114 -.057010466 .007885043 psoda Coef.023957 . 398) Prob > F R-squared Adj R-squared Root MSE P>|t| 0. 399) Prob > F R-squared Adj R-squared Root MSE = = = = = = 401 7.0881 P>|t| [95% Conf.87 Number of obs F( 1.793768 + 0.196020672 2.09700668 1 399 .0821 [95% Conf. Interval] 0.037399 Std.68272938 2 398 .0649269 1.047603 .0000 0.0709657 .15401715 400 .1091399 -. prpblck lincome _cons .1721948 .793768 Std.0051905 t 2.71 199. . Err.000 0.098010336 .006740526 Total 2.61 -4. reg psoda prpblck Source SS df MS Model Residual .0681 N= 401 E) 401 14.1120245 1. Interval] Log(psoda) = -0.02431606% .146524 R squared = 0.1215803prpblck + 0. prpblck _cons .87875005 400 .72 4.34 0.1215803 = = = = = = prpblck = 0.0070 0.2 = 0.1794337 t 4.1215803 .027195 .0165969 . reg lpsoda prpblck lincome Source SS df MS Model Residual .0681 0.0257457 .0765114Log(income) + U Log(psoda) = 0.42 Number of obs F( 2.0438829 -1.0181 0.1215803*0.007761922 Total 3.000 0. D) . Err.007 0.0634 . .4410117 .54 0..007196875 lpsoda Coef.000 .000 .0156 .057010466 3.0178292 1.

0306756 .0000 0.018 0.2937111 t 2.87875005 400 .86 -4. .0728072 . Although if you check the correlation between the three variables you will see there is a low value for lpsoda and prppov and a fairly high correlation between prpblck and prppov therefore it may be a multicollinearity issue.1327903 .0843552 .000 = = = = = = 401 12.463333 Std.62840943 3 397 .1344 0.0870 0.1369553 .37 5.0125003 . reg lpsoda prpblck lincome prppov Source SS df MS Model Residual .60 0.007196875 lpsoda Coef.083446874 . Err.08137 [95% Conf.0260 1.98 Number of obs F( 3. Interval] . .0000 -0.1192999 -2.38036 -1. corr lincome prppov (obs=409) lincome prppov lincome prppov 1.250340622 2. .8385 1.6414201 -.. 397) Prob > F R-squared Adj R-squared Root MSE P>|t| 0.0801 . .0000 F). G) log(income) and prppov being in the same regression model cause the problem of multicollinearity. prpblck lincome prppov _cons . But as the prpblck is not too highly correlated with either of these variables it is still viable to include both in the regression when looking at causality of prpblck on psoda.040756 . the problem of two or more independent variables in a regression being highly correlated. as income goes up poverty goes down.0000 0.1895553 . a correlation figure close to -1 makes sense.006620679 Total 2.8859092 The estimate of B1 changes from 0.0000 0.0267554 . there was a relationship between B1(prpblck) with U(error) and U(error) with Y(lpsoda).000 0.004 0.6795 1.121508 to . corr psoda prpblck prppov (obs=401) psoda prpblck prppov psoda prpblck prppov 1.1331141 .0728072 suggesting that the effects of prppov were previously being incorporated in the effects of prpblck.0000 Yes it is what I would expect.12 2.