ECON 305/FINC 305 - Introduction to Econometrics Assignment #5 1. Construct a 95% confidence interval for estimating the impact of education on earnings, based on the regression: EARNS = -1.315 +.797 ED (1.54) (128) with n= 100, df = 98 2. Construct a 90% confidence interval for estimating the marginal propensity to consume, based on the regression: CON = .568 + .907 DPI; (6.973) (.01) with n = 25, df = 23 Now construct a 99% confidence interval for the same parameter, and compare the two intervals. 3. It is important for the U.S. Treasury to have a good estimate of the marginal propensity to consume in order to recommend tax changes. Would a 100% confidence interval be ideal? 4. Regarding the estimated regression in problem #1 above: test the hypothesis that B = 1. Is your result consistent with your answer in problem 1? Explain why or why not? 5. Again, using the estimated regression in problem #1 above: test the hypothesis that B = .5. Is your result consistent with your answer in problem 1? Explain why or why not?

1. Construct a 95% confidence interval for estimating the impact of education on earnings, based on the regression: EARNSi=1.315+.797EDi(1.54)(.128)withn=100,df=98 2. Construct a 90% confidence interval for estimating the marginal propensity to consume, based on the regression: CONi=.568+.907DPli(6.973)(.01)withn=25,df=23 Now construct a 99% confidence interval for the same parameter, and compare the two intervals. 3. It is important for the U.S. Treasury to have a good estimate of the marginal propensity to consume in order to recommend tax changes. Would a 100% confidence interval be ideal? 4. Regarding the estimated regression in problem $1 above: test the hypothesis that B1=1. Is your result consistent with your answer in problem 1? Explain why or why not? 5. Again, using the estimated regression in problem \#1 above: test the hypothesis that B1=.5. Is your result consistent with your answer in problem 1? Explain why or why not