SCENARIO 14-3
An economist is interested to see how consumption for an economy (in $ billions) is influenced by
gross domestic product ($ billions) and aggregate price (consumer price index). The Microsoft Excel
output of this regression is partially reproduced below.
-Referring to Scenario 14-3, when the economist used a simple linear regression model with consumption as the dependent variable and GDP as the independent variable, he obtained an $r ^ { 2 }$ value of 0.971. What additional percentage of the total variation of consumption has been
Explained by including aggregate prices in the multiple regression?
A) 98.2
B) 11.1
C) 2.8
D) 1.1

Question

SCENARIO 14-3
An economist is interested to see how consumption for an economy (in $ billions) is influenced by
gross domestic product ($ billions) and aggregate price (consumer price index). The Microsoft Excel
output of this regression is partially reproduced below. 
-Referring to Scenario 14-3, when the economist used a simple linear regression model with consumption as the dependent variable and GDP as the independent variable, he obtained an $r ^ { 2 }$ value of 0.971. What additional percentage of the total variation of consumption has been
Explained by including aggregate prices in the multiple regression?
A) 98.2 
B) 11.1 
C) 2.8 
D) 1.1

Quizplus · Accepted Answer

The $r^2$ value of 0.971 indicates that 97.1% of the variation in consumption is explained by GDP alone. If including aggregate prices in the multiple regression increases the $r^2$ to 0.982, then the additional percentage of variation explained is 98.2% - 97.1% = 1.1%.

SCENARIO 14-3 an Economist Is Interested to See How Consumption r2r ^ { 2 }r2

SCENARIO 14-3
an Economist Is Interested to See How Consumption $r ^ { 2 }$