2. We attempt to relate personal savings to personal income for the time period from 1935-1954. X₁ is personal income. Construct a dummy variable, , for the WWII years. Let for peacetime and for wartime. The war years are from 1941 to 1945. We got the following results,

The regression equation is

Savings = - 3.14 + 0.0763 Income + 20.2 War Year

PredictorCoefSE CoefTP

Constant-3.1412.504

Income0.076320.01279

War Year20.165 2.375

S =R-Sq =R-Sq(adj) =

Analysis of Variance

SourceDFSSMSFP

Regression21909.94954.97

Residual Error17349.0620.53

Total192259.00

Durbin-Watson statistic = 2.010

(a)Test to determine whether knowledge of the war years makes a significant contribution to the prediction of personal savings beyond that provided by personal income.

(b)Calculate the standard error of estimation

(c)Calculate the F-statistic and test the significance of regression.

(d)What is the model for the saving model for war years? Compare with the model for not war year, how do we explain the diffidence between those two models?