Suppose an economist has developed a model for forecasting annual consumption,y_t,as function of total labor income,x₁_t ,and total property income,x₂_t based on 20 years on annual data.The following regression model has been developed: = 7.81 + 0.91x₁_t+ 0.57x₂_t with the standard error = 1.29 and the Durbin-Watson d statistic = 2.09.Using an alpha = .05,which of the following conclusions should be reached? A)Conclude that no positive autocorrelation exists B)Conclude that significant positive autocorrelation exists C)Uncertain whether positive or negative autocorrelation exists D)No significant autocorrelation exists.

Question

Quizplus · Accepted Answer

The Durbin-Watson d statistic is 2.09, which is between the lower and upper critical values for no autocorrelation at α=0.05. Therefore, we can conclude that no positive autocorrelation exists.

Suppose an Economist Has Developed a Model for Forecasting Annual