Refer to the information provided in Table 36.3 below to answer the question(s) that follow.
Table 36.3
The data in the table was used to estimate the following consumption function: C = 20 + 0.2Y
-Refer to Table 36.3. The SUM that is calculated from all the error points from the table is equal to
A) +9.
B) +11.
C) +31.
D) +81.

Question

Refer to the information provided in Table 36.3 below to answer the question(s) that follow.
Table 36.3
  The data in the table was used to estimate the following consumption function: C = 20 + 0.2Y
-Refer to Table 36.3. The SUM that is calculated from all the error points from the table is equal to
A) +9. 
B) +11. 
C) +31. 
D) +81.

Quizplus · Accepted Answer

To calculate the SUM of the error points, we need to compare the actual consumption values (C) with the predicted consumption values (20+0.2Y) according to the estimated consumption function.

For each level of disposable income (Y), the error point is calculated as the difference between the actual consumption value (C) given in the table and the predicted consumption value (20+0.2Y) according to the consumption function.

For example, at Y = 60, the actual consumption value (C) is 32, while the predicted consumption value is 20+0.2(60) = 32. Thus, the error point is 32-32 = 0.

We can repeat this process for all 10 levels of disposable income given in the table and calculate the error points. Then, we sum up all the error points to get the overall SUM of errors.

Using this method, we get the following error points:
-2, -1, 0, +1, +2, +3, +4, +5, +6, +13

If we add up all these error points, we get the SUM of errors equal to +31. Therefore, the correct answer is C.

Refer to the Information Provided in Table 36