Answer Happy

Tamson Russell, an economist working for the government, was trying to determine the demand function for passenger car motor fuel in the United States. Tamson developed a model that used the actual price of a gallon of regular gasoline to predict motor fuel consumed per year. After adding a variable representing the population of the United States to the model, she was able to explain 76.6% of the variation in fuel consumption. Did Tamson have a problem with serial correlation? The data are shown in Table P-9. TABLE P-9 Motor Fuel Consumed by Cars Price of (billions of gallons) Gasoline ($/gallon) Year Y 1973 78.8 .39 1974 75.1 .53 1975 76.4 .57 1976 79.7 .59 1977 80.4 .62 1978 81.7 .63 1979 77.1 .86 1980 71.9 1.19 1981 71.0 1.33 1982 70.1 1.26 1983 69.9 1.22 1984 68.7 1.21 1985 69.3 1.16 1986 71.4 .92 1987 70.6 95 1988 71.7 .95 U.S. Population (millions) X; 211.9 213.9 216.0 218.0 220.2 222.6 225.1 227.7 230.1 232.5 234.8 236.3 238.5 240.7 242.8 245.1 Source: Statistical Abstract of the United States, various years.