Question

Suppose you are interested in studying the relationship between food consumption expenditure and income levels, household size and wealth which follows the following econometrics model

Cons=β"0"+ β"1" Inc+β"2" HHS+β"3" Wth+ μ

Where Cons is consumption expenditure, Inco is income level, HHS is Household size and Wth is wealth.

Upon estimating the model, the results were reported as below with standard errors in parentheses

Cons=1.390+ 0.412Inc+0.015HHS+0.321Wth

[0.33] [0.094] [0.011] [0.026]

R"2"=0.546, n=141

REQUIRED

a). Interpret the results including R2 (8Mks)

b). Given 5% level of significance, can you reject the null hypothesis that β"0" is actually zero? (5Mks)

c). is β"1" and β"2" simultaneously equal to Zero at 5% level of significance? (Hint: use F test) (6Mks)

d). is income and wealth jointly equal to Zero at 5%? (Hint: use F test) (6mks

Answer 1

The answer can be given as follows: