2. Suppose you have performed a regression (sample size n = 122) and the results are: Ci = 27.5 + .511Yi + .046Ai +ui (1

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2. Suppose you have performed a regression (sample size
n = 122) and the results are:
Ci = 27.5 + .511Yi +
.046Ai +ui
(1.05) (.095)
r2 = .91; adjusted r2 = .79; s.e
regression = 19.4
where C= consumption, Y = income, A = non-cash assets.
Standard errors are in parentheses (15 pts).
2a. Do the equation,
regression results, and summary statistics shown above suggest a
potential problem in the regression to you? If so, what might that
problem be?
2b. What in the equation and
summary statistics leads you to that conclusion?
2c. What difficulty might the
problem cause for your regression?