The attached file also contains 6 observations of the following variables:

	Inflation Rate	Money Supply Growth Rate	GDP Growth Rate	Random Number
Australia	6.76%	11.66%	4.00%	-1.154492111
Canada	5.19%	9.15%	5.20%	-2.483757271
New Zealand	8.15%	10.60%	2.10%	-0.2807610144
Switzerland	3.39%	5.75%	3.60%	-0.6210575521
United Kingdom	7.58%	12.58%	3.80%	0.5348829291
United States	5.09%	6.34%	3.70%	-0.7208154784

pi: Inflation rate
mi: Money supply growth rate
yi: GDP growth rate
ri: Random number generated with EXCEL

Consider the following THREE models:

(i) pi = β0 +β1mi +ei

(ii) pi = β0 +β1mi + β2yi +ei

(iii) pi = β0 +β1mi + β2yi + β3ri +ei

(a) For each of the Model (i), (ii) and (iii), perform the hypothesis test for ALL slopes are 0.

(b) For Model (i) and (ii), can you use a t-test? Please explain.

(c) Based on your results in (a) and (b), or otherwise, which model do you select? 

(d) Pick one of the models. Calculate the variation of the model per number of causal variables.

(e) Pick one of the models. Calculate the estimate of the variance of the error.