The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education. Savings = β₀ + ₀ Edu + β₁Inc + u
The variable 'Edu' takes a value of 1 if the person is educated and the variable 'Inc' measures the income of the individual.

Refer to the model above. The benchmark group in this model is _____.

Question

The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education. Savings = β₀ +

The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education. Savings = β<sub>0</sub> + <sub>0</sub> Edu + β<sub>1</sub>Inc + u The variable 'Edu' takes a value of 1 if the person is educated and the variable 'Inc' measures the income of the individual. Refer to the model above. The benchmark group in this model is _____. A) the group of educated people B) the group of uneducated people C) the group of individuals with a high income D) the group of individuals with a low income

₀ Edu + β₁Inc + u
The variable 'Edu' takes a value of 1 if the person is educated and the variable 'Inc' measures the income of the individual.

Refer to the model above. The benchmark group in this model is _____.

Quizplus · Accepted Answer

The benchmark group in this model is the group of uneducated people, as they are the reference group for the variable 'Edu' which takes a value of 0 for uneducated individuals. Therefore, the coefficient of the 'Edu' variable measures the difference in savings for educated individuals compared to uneducated individuals. The benchmark group is the group against which comparisons are made. In this case, the savings of a literate person is being compared to the savings of an illiterate person; therefore, the group of illiterate people is the base group or benchmark group.

The Following Simple Model Is Used to Determine the Annual