A. Ando and F. Modigliani collected the following data on the income and consumption of non-self-employed homeowners:
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A. Ando and F. Modigliani collected the following data on the income and consumption of non-self-employed homeowners:
a. Run a regression to explain average consumption as a function of average income.
b. Use the Breusch–Pagan test to test the residuals from the equation you ran in part a for heteroskedasticity at the 5-percent level.
c. Run a 5-percent White test on the same residuals.
d. If the tests run in parts b or c show evidence of heteroskedasticity, then what, if anything, should be done about it?
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