The Faculty of Business, Economics and Law

CONTENTS

PART I. SIMPLE REGRESSION ANALYSIS 4

(a) Statement of estimated equation 4

(b) Interpretation of coefficient 4

(c) Comment on the significance of the model 4

(d) Test of regression assumptions 5

PART II. MULTIPLE REGRESSION ANALYSIS 6

(a) Explanation of selected variables for the model 6

(b) Statement of estimated equation 6

(c) Interpretation of coefficients 7

(d) Comment on the significance of the model 7

(e) Test for regression assumptions 8

APPENDIX LIST

Appendix 1. TABLES

Part 1. Simple Regression Analysis….....................................................................................11

Table 1.1 Regression Analysis.....................................................................................11

Table 1.2 ANOVA Analysis.…………………...…………….……………………...11

Table 1.3 Regression Statistics.………………...…………….………….…………...11

Table 1.4 Durbin-Watson Calculations.…………………...…………….…………...11

Part 2. Multiple Regression Analysis…...................................................................................12

Table 2.1 Regression Analysis.....................................................................................12

Table 2.2 ANOVA Analysis.…………………...………….…………......………….12

Table 2.3 Regression Statistics.………………...………….…………......……….….12

Table 2.4 Durbin-Watson Calculations………...………….…………......……….….12

Table 2.5 Regression Analysis - Imports of goods and all other X….....….……...….13

Table 2.6 Regression Analysis - Population (midperiod) and all other X……..…….13

Table 2.7 Regression Analysis - Disposable Personal Income and all other X….......13

Appendix 2. CHARTS

Part 1. Simple Regression Analysis….....................................................................................14

Chart 1.1 Line Fit Plot………......................................................................................14

Chart 1.2 Disposable Personal Income Residual Plot.…………………...……..……14

Chart 1.3 Frequency Distribution of the Residuals….…………………...……..……15

Chart 1.4 Equal Variance Residual Plot……………..…………………...……..……15

Part 2. Multiple Regression Regression Analysis…................................................................16

Chart 2.1 Disposable Personal Income Line Fit Plot...................................................16

Chart 2.2 Population (midperiod) Line Fit Plot…………..………………………….16

Chart 2.3 Imports of Goods Line Fit Plot…….…………..………………………….16

Chart 2.4 Scatter Plot of Residuals and predicted Y….…..………………………….17

Chart 2.5 Frequency Distribution of the Residuals……..……………………………17

Chart 2.6 Disposable Personal Income Residuals Plot…..…………………………..17

Chart 2.7 Population Residuals Plot……..…...…………..………………………….18

Chart 2.8 Imports of Goods Residuals Plot.…………………...…………..…………18

PART I. SIMPLE REGRESSION ANALYSIS

(a) Statement of estimated equation

The result of regression based on KaddStat analysis as shown in the following Table 1.1 and the equation for the relation between consumption of durable goods and disposable personal income as follow:

Estimated regression equation:

The dependent variable (Y) durable goods component of personal consumption expenditure measured in billion dollar since expenditure depends on disposable personal income.

(b) Interpretation of coefficient

Coefficient 0.2323 says that when disposable personal income (X) increases by 1 billion dollar, the personal consumption expenditure is expected to go up 0.2323 billion dollars (232.3 million dollars).

(c) Comment on the significance of the model

Determining the existence of significant relationship between two variables, two tailed t test was conducted. To test for the slope of using t test with level of significance is 5%. Assumptions for the slope are as follows:

Hypotheses:

Decision rule: Reject if

Test statistic: From the Table 1.1, tcalc=60.3708

Decision: