TABLE 13-3
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 Table 13-3, 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

TABLE 13-3
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 Table 13-3, 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 GDP and the predicted GDP based on the aggregate consumption level. Here, the residual is $3.5 billion (actual GDP) - $3 billion (aggregate consumption level) = $0.5 billion. However, considering the aggregate price level, the residual is adjusted to $0.48 billion.

TABLE 13-3 an Economist Is Interested to See How Consumption for an for an Economy