salary spending22,934 272927,170 553618,443 230525,853 416819,538 264224,500 354720,460 312424,274 315921,419 275227,170 362125,160 342930,168 378222,482 394726,525 424720,969 250927,360 398227,224 544021,690 356825,892 404221,974 315522,644 340220,816 305924,640 282918,095 296722,341 229720,939 328525,610 2932

Your table gives a sample of data on average public teacher pay (annual salary in dollars) and spending on public schools per pupil (dollars) in 1985 for 25 states. To find out if there is any relationship between teacher's pay and per pupil expenditure in public schools, the following model was suggested: , where stands for teacher's salary and Spend stands for per pupil expenditure. a. Plot the data and eyeball a regression line. State what you think is the relationship between these two variables given this graph. (10 points) b. Suppose on the basis of (a) you decide to estimate the above regression model. Obtain the estimates of the parameters, their standard errors, r, RSS, and ESS. (10 points) c. Interpret the regression. Does it make economic sense? (20 points) d. Establish a 95% confidence interval for B, . Would you reject the hypothesis that the true slope coefficient is 3.0? Why or why not? Explain your answer. (20 points) e. Obtain the mean and individual forecast value of teacher's salary if per pupil spending is $5000. (10 points) f. Establish a 95% confidence intervals for the true mean and individual values of teacher's salary for the given spending figure. (20 points) g. How would you test the assumption of the normality of the error term? Show the test(s) you use. (10 points) END