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A Researcher Gathers Data on 25 Households and Estimates the Following

Question 1

Multiple Choice

A researcher gathers data on 25 households and estimates the following model: Expenditure = β0 + β1 Income + ε. A residual plot of the estimated model is shown in the accompanying graph. A researcher gathers data on 25 households and estimates the following model: Expenditure = β<sub>0</sub> + β<sub>1</sub> Income + ε. A residual plot of the estimated model is shown in the accompanying graph. Which of the following can be inferred from the residual plot? A) The residuals have little variation. B) The residuals do not exhibit any pattern. C) The residuals seem to fan out across the horizontal axis. D) The residuals are evenly distributed across the horizontal axis. Which of the following can be inferred from the residual plot?


A) The residuals have little variation.
B) The residuals do not exhibit any pattern.
C) The residuals seem to fan out across the horizontal axis.
D) The residuals are evenly distributed across the horizontal axis.

Correct Answer:

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