Interpret the estimated slope coefficient

Reference no: EM131798672

The savings rate has declined dramatically over the past few decades (CNNMoney.com, June 3 0 , 2010). While some economists are extremely concerned about this decline, others believe that it is a nonissue. Consider the following monthly data on the personal savings rate (Savings) and the personal disposable income (Income) in the U.S. from January 2007 to November 2010; the complete dataset, labeled Savings Rate, can be found on the text website.

1611_personal disposable income.png

a. Compare the linear model, Savings = β₀ + β₁ Income + ε, with a log-log model, In (Savings) = β₀ + β₁ ln (Income) + ε.

b. Interpret the estimated slope coefficient of both models.

c. Which is the preferred model? Explain.

Reference no: EM131798672

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