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An AR(1) model is derived as follows: (with the standard error of the coefficient given in the brackets) EXP(t) = 3.46 + 0.442 * EXP(t-1)

An AR(1) model is derived as follows: (with the standard error of the coefficient given in the brackets)

EXP(t) = 3.46 + 0.442 * EXP(t-1)

(0.202)

where

EXP(t) = the value of exports in millions of dollars in year, t

EXP(t-1)= the value of exports in millions of dollars in year, t-1

And the number of observations for this model is 24.

An economist believes that export prices from the previous year have a significant effect on the export prices in year t and wishes to test this claim using a 5% level of significance.

1. State the direction of the alternative hypothesis used to test the economist's claim. Type gt (greater than), ge (greater than or equal to), lt (less than), le (less than or equal to) or ne (not equal to) as appropriate in the box.

2. Calculate the test statistic (ie. a t-stat), report your answer correct to three decimal places.

3. Use the tables in the text to determine the critical value used to conduct the test. If there are two critical values, state only the positive value (three decimal places)..

4. Is the null hypothesis rejected for this test? Type yes or no.

5. Would you achieve the same result using an F test for the overall model? Type yes or no.

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