THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION: A loan officer is interested in examining the determinants of the total dollar value of residential loans made during a month.The officer used lnY = β 0 + β 1 lnX 1 + β 2 lnX 2 + β 3 lnX 3 + lnε to model the relationship,where Y is the total dollar value of residential loans in a month (in millions of dollars),X 1 is the number of loans,X 2 is the interest rate,and X 3 is the dollar value of expenditures of the bank on advertising (in thousands of dollars).Using data from the past 24 months,she obtained ln = 0.67 + 1.2 ln x 1 - 1.45 ln x 2 + 1.07 ln x 3 . -How would the officer interpret the coefficient on x₃? A)As the total loan amount increases,the amount of advertising increases at an increasing rate. B)As the amount of advertising increases,the total loan amount increases at an increasing rate. C)As the amount of advertising increases,the total loan amount increases at a decreasing rate. D)As the total loan amount increases,the amount of advertising increases at a decreasing rate.

Question

Quizplus · Accepted Answer

The coefficient on x₃ is 1.07, indicating that as the dollar value of expenditures on advertising increases, the total dollar value of residential loans made during a month increases at an increasing rate.