Question

consider the following regression

ln(GDP) = 0.80 + 0.70 ln (M2V) + 0.10 ln (debt)

where GDP = Gross National Product

M2V = velocity of money

debt = National debt

choose the correct interpretation of the coefficient of debt

		if debt increase by 1 unit, GDP will increase by 0.10 units, assuming all other variables remain constant.
		if debt increases by 1 unit, GDP will increase by 0.10 %, assuming all other variables remain constant.
		if debt increases by 1%, GDP will increase by 0.10 %, assuming all other variables remain constant.
		if debt increases by 1%, GDP will increase by 10%, assuming all other variables remain constant.

Answer 1

The answer to the question is a ) if debt increases by 1 unit , GDP will increase by 0.1 unit assuming all the other variables remain constant.

This is the correct denotion to explain the coefficient of determination obtained by the method of ordinary least squares in a multiple regression. Its just like elasticity in economics.

I hope this helps you. There is not much to explain as this is quite straightforward.

I hope this helps you.

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