Problem 3.18: There is a strong positive correlation (84.24%) between midterm and final marks.

Students are likely to take same marks in both.

Problem 3.19:
a) When the US/German CPI ratio changes by 1 the GM/$ exchange rate decreases by
4.318
The variability in the exchange rate is 52.8% explained by the regression model.

b) According to economic theory when US/German CPI will increase the value of dollar
should decrease and GM/$ exchange rate should fall. The negative beta (slope) of the
regression equation shows that this economics relationship is true

c) If X= German/US CPI, keeping Y still as GM/$ exchange rate, the slope of the regression
should be positive because an increase in X (relatively higher CPI in Germany) should
make dollar more valuable against GM, therefore Y must increase as X increases.


Problem 3.20: According to the economic relationship compensation should increase with
output. The scatter diagram des support this theory for both sectors.


Problem 3.22: For NYSE the relation holds. But for Gold price no linear relationship can be
observed from the scatter plot.


Problem 3.23: For NGDP B1=-98633 B2=201.97
For RGDP B1=1907.7 B2=128.78
B2 means the rate at which NGDP and RGDP increase each year.
The difference is explained by the inflation. RGDP is inflation adjusted. Due to
inflation B2 of RGDP is less than NGDP because increase in GDP is partly due to the
inflation.