16dec

Question 1

R²=0.7930 (goodness of fit)

Answer 1

The coefficient of determination is not very high (R²=0.7930), but it is also not very low. It indicates that 79.30% of the sample variability in Y is explained by its linear relationship with the sample variability in X2 and X3.

Question 2

p-value < alpha =>

Answer 2

the model as a whole/the estimated coefficients is/are significant => continue working with the model.

Question 3

𝛽̂₂ = 1.56×10⁻⁵ units

Answer 3

If X2 increases by 1 unit, while the X3 remains constant, it is estimated that the average Y increases by 1.56×10⁻⁵ units.

Question 4

Contrast whether the linear specification that we have proposed is correct, indicating null and alternative hypotheses and conclusions from the result obtained.

Answer 4

Ramsey’s RESET test;
p-value < alpha => reject H0 => linear specification is incorrect.

Question 5

b) What consequences could have made a specification error in the functional form have on our model?