To explain personal consumption (CONS) measured in dollars, data is collected fo
ID: 3219240 • Letter: T
Question
To explain personal consumption (CONS) measured in dollars, data is collected for
INC:
personal income in dollars
CRDTLIM:
$1 plus the credit limit in dollars available to the individual
APR:
mean annualized percentage interest rate for borrowing for the individual
ADVT:
per person advertising expenditure in dollars by manufacturers in the city where the individual lives
SEX:
gender of the individual; 1 if female, 0 if male
A regression analysis was performed with CONS as the dependent variable and CRDTLIM, APR, ADVT, and GENDER as the independent variables. The estimated model was
CONS = 2.28 – 0.29*CRDTLIM + 5.77*APR +2.35*ADVT+0.39*SEX
What is the correct interpretation for the estimated coefficient for GENDER?
A) Holding the effect of the other independent variables constant, mean personal consumption for females is estimated to be $0.39 higher than males.
B) Holding the effect of the other independent variables constant, mean personal consumption for males is estimated to be $0.39 higher than females.
C) Holding the effect of the other independent variables constant, mean personal consumption for females is estimated to be 0.39% higher than males.
D) Holding the effect of the other independent variables constant, mean personal consumption for males is estimated to be 0.39% higher than females.
INC:
personal income in dollars
CRDTLIM:
$1 plus the credit limit in dollars available to the individual
APR:
mean annualized percentage interest rate for borrowing for the individual
ADVT:
per person advertising expenditure in dollars by manufacturers in the city where the individual lives
SEX:
gender of the individual; 1 if female, 0 if male
Explanation / Answer
As we can see from the equation ,
CONS = 2.28 – 0.29*CRDTLIM + 5.77*APR +2.35*ADVT+0.39*SEX
Consumption in dollars is related to SEX by a factor of 0.39
where SEX = 1 for females and 0 for males. For females , everything else being constant, consumption for femes is greater than males by 0.39 dollars
Hence, the answer is A. Holding the effect of the other independent variables constant, mean personal consumption for females is estimated to be $0.39 higher than males.