Question

Note: Please show all calculations and explain results.You can post screenshots of calculations as images

The following data give the yearly inflation rate and money supply growth rate for sixteen Latin American countries (both Inflation and Growth are in units of percentage points):

Inflation 43 41.3 35.1 28.2 26.4 12.5 9.2 8.5 5.3 3.4 3 2.1 1.9 1.1 1.1 0.3

Growth 40.1 41.6 38.2 25.2 24.6 15.4 16.5 13.4 11.3 8.6 8.8 8.0 9.0 5.9 7.9 3.5

A simple regression of Inflation on Growth yields:

R	R Square	Adj. R(Sqr)	St. Err of(Est)	df	F	p-value
0.987	0.974	0.972	2.568	14	525.678	0.000

Variable	Coeff.	Std. Err	t-value	p-value
Constant	-6.85	1.110	-6.176	0.000
Growth	1.194	0.052	22.928	0.000

a. What is the R² value? What does it mean?

b. Give details of the linear relationship implied by these data. Is there a significant relationship and why? And what is the magnitude?

c. What would the expected inflation be for a country with an 8% money supply growth?

d. Find the 95% prediction interval for the expected inflation rate for a country with an 8% growth in the money supply.

Answer 1