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Based on the GNP/money supply data given in Table 5-14 (found on the textbook s Web site), the following regression results were obtained (y = GNP, X = M2):
a. For each model, interpret the slope coefficient.
b. For each model, estimate the elasticity of the GNP with respect to money supply and interpret it.
c. Are all r2 values directly comparable? If not, which ones are?
d. Which model will you choose? What criteria did you consider in your choice?
e. According to the monetarists, there is a one-to-one relationship between the rate of changes in the money supply and the GDP. Do the preceding regressions support this view? How would you test this formally? |
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