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 x₂? A)As the interest rate increases,the total loan amount decreases at a decreasing rate. B)As the total loan amount increases,the interest rate decreases at an increasing rate. C)As the interest rate increases,the total loan amount decreases at an increasing rate. D)As the total loan amount increases,the interest rate decreases at a decreasing rate.

Question

Quizplus · Accepted Answer

The coefficient on x₂ is -1.45, indicating that as the interest rate increases, the total loan amount decreases at an increasing rate.