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(20 points) In examining the relationship between the unemployment rate and the growth rate of real GDP, Atems (2013) obtains the following results: Yˆt = 0.85 − 0.03 Ut se = ( ) (0.0025) (3.067) ( ) (8) where Yt is growth rate of output, and Utis the unemployment rate.

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1. (20 points) In examining the relationship between the unemployment rate and the growth rate of real GDP, Atems (2013) obtains the following results: Yˆt = 0.85 − 0.03 Ut se = ( ) (0.0025) (3.067) ( ) (8) where Yt is growth rate of output, and Utis the unemployment rate. (a) (6 points) Interpret the estimates of the slope and intercept (b) (8 points) Are the estimates of the slope and intercept statistically significant? How do you know? (c) (6 points) Is the estimate of the slope realistic for the U.S. economy? (Sign and significance) Explain why or why not. 2. (22 points) Are rent rates influenced by the student population in a college town? To examine this, Ansah, Jones,Tungara, and Whaley (2012) collect data on the following variables: rent – the average monthly rent paid on rental units in a college town in the U.S; pop – total city population; avginc – average city income; pctstu – the student population as a percentage of total population. The authors estimate the model: log(rent) = β1 + β2log(pop) + β3log(avginc) + β4pctstu + u (9) 3

 
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