Problem 5: PART II REGRESSION ANALYSIS Answer questions (a) through (e) using the following information and output for multiple regression.

The production of car tires in any given year is related to the number of cars produced that year and in prior years. Suppose our econometric model resulted in the following data.

	Regression Coefficient	t-Statistic	p-Value
X1 = Cars Produced This Year	5.00	10.4	0.0000
X2 = Cars Produced Last Year	0.25	0.6	0.5499
X3 = Cars Produced 2 Years Ago	0.67	1.4	0.1646
X4 = Cars Produced 3 Years Ago	2.12	2.7	0.0081
X5 = Cars Produced 4 Years Ago	3.44	6.5	0.0000
Constant	-50,000
Multiple R	0.83
R Squared	?

1. Why is the coefficient for cars produced this year a positive number?
2. Which is the most statistically significant variable? What evidence shows this?
3. Which is the least statistically significant variable? What evidence shows this?
4. For a 0.05 level of significance, should any variable be dropped from this model? Why or why not?
5. What is the R Squared Value? What is the interpretation?