The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education. Savings = β₀ + ₀ Edu + β₁Inc + u The variable 'Edu' takes a value of 1 if the person is educated and the variable 'Inc' measures the income of the individual. Refer to the above model. If ₀ 0, _____. A)uneducated people have higher savings than those who are educated B)educated people have higher savings than those who are not educated C)individuals with lower income have higher savings D)individual with lower income have higher savings

Question

The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education. Savings = β₀ + ₀ Edu + β₁Inc + u The variable 'Edu' takes a value of 1 if the person is educated and the variable 'Inc' measures the income of the individual. Refer to the above model. If ₀ > 0, _____. A)uneducated people have higher savings than those who are educated B)educated people have higher savings than those who are not educated C)individuals with lower income have higher savings D)individual with lower income have higher savings

Quizplus · Accepted Answer

If β₀ > 0, it means that being educated has a positive impact on annual savings. Hence, educated people will have higher savings than those who are not educated.

The Following Simple Model Is Used to Determine the Annual