Based on the data for the United States for the period 1970 to 1983, the following regression results were obtained:

GNPt = -787.4723 + 8.0863M1t r2 = 0.9912

se = ( ) (0.2197)

t= (-10.10001) ( )

where GNP is the gross national product (S, in billions) and M1 is the money supply (S, in billions)

Note: M1 includes currency, demand deposits, travelers checks, and other checkable deposits.

a. Fill in the blank parentheses.

b. The monetarist maintain that the money supply has a significant positive impact on GNP. How would you test this hypothesis?

c. What is the meaning of the negative intercept?

d. Suppose M1 for 1984 is $552 billion. What is the mean forecast value GNP for that year?

14. Table 7-5 gives data on X [net profits after tax in U.S. manufacturing industries ($, in millions)] and Y [cash dividend paid quarterly in manufacturing industries ($, in millions)] for years 1974 to 1986.

a. What relationship, if any, do you expect between cash dividend and after tax profits?

b. Plot the scattergram between Y and X.

c. Does the scattergram support your expectation in part (a)?

d. If so, do an OLS regression of Y on X and obtain the usual statistics.

e. Establish a 99% confidence interval for the true slope and test the hypothesis that the true slope coefficient is zero; that is, there is no relationship between dividend and the after-tax profit.

Table 7-5 CASH DIVIDENT (y) AND AFTER-TAX PROFITS (X) IN U.S.

MANUFACTURING INDUSTRIES, 1974-1986.

|Year |Y |X |Year |Y |X |

|($ in Millions) |($ in Millions) |

|1974 |19,467 |58,747...