Evaluate the impact of the adjustments on the regression

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A researcher has data on the aggregate expenditure on services, Y, and aggregate disposable personal income, X, both measured in $ billion at constant prices, for each of the U.S. states and fits the equation

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The researcher initially fits the equation using OLS regression analysis. However, suspecting that tax evasion causes both Y and X to be substantially underestimated, the researcher adopts two alternative methods of compensating for the under-reporting:

1. The researcher adds $90 billion to the data for Y in each state and $200 billion to the data for X.

2. The researcher increases the figures for both Y and X in each state by 10 percent.
Evaluate the impact of the adjustments on the regression results.

Reference no: EM131132465

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