Question

Consider a Log-Log Model where the dependent variable is the amount of political campaign contributions from a county in dollars. One independent variable is the average income in the county in dollars. The coefficient on average income is 0.41. What do the results of the Log-Log Model suggest?

Group of answer choices

On average, a $1,000 increase in average income results in a $410 increase in the amount of political campaign contributions

On average, a $1,000 increase in monthly income results in an 410% increase in the amount of political campaign contributions

On average, a 10% increase in monthly income results in a 4.1% increase in the amount of political campaign contributions

On average, a 10% increase in monthly income results in a $4.10 increase in the amount of political campaign contributions

Answer 1

Log-Log regression;

In case of Log-Log regression model, one percent change in independent variable leads to percent change in dependent variable.

Where is the coefficient of independent variable.

We have the following information.

Dependent variable= political campaign contributions.

Independent variable = average income

= 0.41.

Therefore, 10% increase in monthly inocme results in a 4.1% (i.e., 10% * 0.41) increase in the amount of political campaign contribution.

Answer: Option (C)