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, one economy in the sample had an aggregate consumption level of $3 billion, a GDP of $3.5 billion, and an aggregate price level of 125. What is the residual for this
Data point?
A) $2.52 billion
B) $0.48 billion
C) - $1.33 billion
D) - $2.52 billion

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, one economy in the sample had an aggregate consumption level of $3 billion, a GDP of $3.5 billion, and an aggregate price level of 125. What is the residual for this
Data point?
A) $2.52 billion 
B) $0.48 billion 
C) - $1.33 billion 
D) - $2.52 billion

Quizplus · Accepted Answer

The residual is calculated as the difference between the actual consumption level and the predicted consumption level. Here, the residual is $3 billion (actual consumption) - $3.5 billion (GDP) = -$0.5 billion. However, considering the aggregate price level, the residual is adjusted to $0.48 billion.

SCENARIO 14-3 an Economist Is Interested to See How Consumption for an for an Economy