Transforming the first equation into the second equation

Reference no: EM13794896

Consider the two regressions in Table 2 based on the U.S. data for 1946 to 1975. (Standard errors are in parentheses.) The objective of Hanushek and Jackson's study was to find out the effect of defense expenditure on other expenditures in the economy.

a)What might be the reason(s) for transforming the first equation into the second equation?

b)If the objective of the transformation was to remove or reduce heteroscedasticity, what assumption has been made about the error variance?

c) If there was heteroscedasticity, have the authors succeeded in removing it? How can you tell?

d)Does the transformed regression have to be run through the origin? Why or why not?

e)Can you compare the R2 values of the two regressions? Why or why not?

Table 2

se= (2.73) (.0060) (0.0736) R2=.875

CtGNPt=25.921GNPt+.6246-.4315DtGNPt

se= (2.22) (.0068) (0.0597) R2=.895

where C= aggregate private consumption expenditure
GNP= Gross National Product

D= National Defense Expenditure

t=time

Reference no: EM13794896

Questions Cloud

The systolic and diastolic blood pressure : What is hypertension? What do the systolic and diastolic blood pressure readings represent?

Model for men separately and fit the model : Suppose the equation of interest is now SLEEP=β0+ β1TOTWORK+ β2EDUC+ β3AGE+ β4AGESQ+ β5YNGKID +u

Constitution is a living document : Explain the statement "The Constitution is a living document". What is the Supreme Court's role as it relates to the constitution.

JIT system-What is the minimum amount of cost savings : James Corporation produces bucket loader assemblies for the tractor industry. The product has a long-term life expectancy. Smith has decided to implement a JIT inventory system. What is the minimum amount of cost savings (in dollars) that Smith would..

Transforming the first equation into the second equation : Consider the two regressions in Table 2 based on the U.S. data for 1946 to 1975. (Standard errors are in parentheses.) The objective of Hanushek and Jackson's study was to find out the effect of defense expenditure on other expenditures in the econom..

Explain critical need for transitional services for students : How would you explain the critical need for transitional services for students with disabilities? What are challenges associated with transitions for students with disabilities?

Detectives working in plain clothes : You and your partner are detectives working in plain clothes. For several days, you have been staking out an elementary school playground where an adult male reportedly has been approaching the children.

Purposely underestimate bids in order to win nasa contracts : Kendahl Plastics Corporation contracts with NASA to manufacture component parts used in communications satellites. NASA reimburses Kendahl on the basis of the actual manufacturing costs it incurs, plus a fixed percentage. Let us assume that it is com..

The economic impact of the law related issues : Should the United States adopt additional policies or laws to curb greenhouse gas emissions?

User Account

All Pages