Suppose you include a time trend in your model of U.S.Personal Consumption Expenditures (billions)on U.S.Personal Income (billions)using quarterly data for the period 1969Q1-2013Q3 and you get $$\begin{array} { l }
\text { Consumption } _ { t } = &- 69.616 + &0.877 \text { Income } _ { t } -& 4.427 \text { Time Trend } _ { t } \
&( 13.460 )& ( 0.007 )& ( 0.572 ) \
&&n = 179 \
&&R ^ { 2 } = .9995
\end{array}$$
a)Explain how to create the time trend variable.
b)Interpret the time trend variable and comment if it is statistically significant.
c)Explain how to detrend both the dependent and independent variable.

Question

Suppose you include a time trend in your model of U.S.Personal Consumption Expenditures (billions)on U.S.Personal Income (billions)using quarterly data for the period 1969Q1-2013Q3 and you get $$\begin{array} { l } 
\text { Consumption } _ { t } = &- 69.616 + &0.877 \text { Income } _ { t } -& 4.427 \text { Time Trend } _ { t } \
&( 13.460 )& ( 0.007 )& ( 0.572 ) \
&&n = 179 \
&&R ^ { 2 } = .9995
\end{array}$$ 
a)Explain how to create the time trend variable.
b)Interpret the time trend variable and comment if it is statistically significant.
c)Explain how to detrend both the dependent and independent variable.

Quizplus · Accepted Answer

The Answer of Suppose you include a time trend in your model of U.S.Personal Consumption Expenditures (billions)on U.S.Personal Income (billions)using quarterly data for the period 1969Q1-2013Q3 and you get $$\begin{array} { l } 
\text { Consumption } _ { t } = &- 69.616 + &0.877 \text { Income } _ { t } -& 4.427 \text { Time Trend } _ { t } \
&( 13.460 )& ( 0.007 )& ( 0.572 ) \
&&n = 179 \
&&R ^ { 2 } = .9995
\end{array}$$ 
a)Explain how to create the time trend variable.
b)Interpret the time trend variable and comment if it is statistically significant.
c)Explain how to detrend both the dependent and independent variable.

Suppose You Include a Time Trend in Your Model of U.S.Personal