Question
Defense Spending Some experts have suggested that the US economy thrives when the nation is involved in global conflict. The dataset Defense.xlsx below contains defense
Defense Spending
Some experts have suggested that the US economy thrives when the nation is involved in global conflict. The dataset "Defense.xlsx" below contains defense spending and the U.S. GDP for 28 quarters. Build a simple regression model to estimate the impact of the past quarter's (q-1) defense spending on the quarterly U.S. GDP. (30 points total)
a) Make a scatterplot where the residuals are the Y-values (vertical axis) and the lagged (q-1) quarterly defense spending are the X-values (horizontal axis). Based on your scatterplot would you conclude that the residuals and the lagged (q-1) quarterly defense spending are independent? Why or why not? (6 pts)
b) Make a histogram of the residuals where you compare the distribution of the residuals with the normal distribution. Based on your chart would you conclude the residuals are approximately normally distributed? Why or why not? (6 pts)
c) At the .01 level of significance, is the past quarter defense spending a driver of GDP? Justify your conclusion using the regression outputs. (4 pts)
d) What percent of variation in quarterly GDP can be explained by variation in the past quarterly defense spending? Justify your conclusion using the regression outputs. (4 pts)
e) What is the 95% margin of error for forecasts of GDP using the regression model? (5 pts)
f) How much does the predicted quarterly GDP change with a $1 billion increase in defense spending in the past quarter? Provide a 95% confidence interval for your estimate? (5 pts)
Defense.xlsx
| Quarter | Defense spending q-1 ($B) | GDP (B$) |
| 6/30/2000 | 360.90 | 9,823.00 |
| 9/30/2000 | 375.20 | 9,862.00 |
| 12/31/2000 | 371.30 | 9,954.00 |
| 3/31/2001 | 373.80 | 10,022.00 |
| 6/30/2001 | 383.50 | 10,129.00 |
| 9/30/2001 | 388.30 | 10,135.00 |
| 12/31/2001 | 393.00 | 10,226.00 |
| 3/31/2002 | 405.60 | 10,338.00 |
| 6/30/2002 | 418.50 | 10,446.00 |
| 9/30/2002 | 431.70 | 10,547.00 |
| 12/31/2002 | 436.50 | 10,618.00 |
| 3/31/2003 | 461.00 | 10,706.00 |
| 6/30/2003 | 467.40 | 10,832.00 |
| 9/30/2003 | 506.90 | 11,086.00 |
| 12/31/2003 | 501.50 | 11,220.00 |
| 3/31/2004 | 513.10 | 11,431.00 |
| 6/30/2004 | 537.70 | 11,649.00 |
| 9/30/2004 | 548.10 | 11,799.00 |
| 12/31/2004 | 564.10 | 11,970.00 |
| 3/31/2005 | 555.10 | 12,173.00 |
| 6/30/2005 | 576.80 | 12,346.00 |
| 9/30/2005 | 584.30 | 12,573.00 |
| 12/31/2005 | 605.00 | 12,731.00 |
| 3/31/2006 | 590.90 | 13,008.00 |
| 6/30/2006 | 613.50 | 13,197.00 |
| 9/30/2006 | 616.50 | 13,323.00 |
| 12/31/2006 | 618.10 | 13,458.00 |
| 3/31/2007 | 635.80 | 13,620.00 |
| 6/30/2007 | 633.5 |
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Complex Variables and Applications
Authors: James Brown, Ruel Churchill
8th edition
73051942, 978-0073051949
