Suppose you are presented with the following regression equation involving health care expenditures and its determinants, where all of the variables have been defined previously.

E 5 500 2 25P 1 0.20Y 2 1.2A R2 5 0.30

11.212 12.452 10.432 14.132 N 5 1,000

a. What percent of the variation in health care spending is explained by the various independent variables?

b. Which of the independent variable possess a statistical significant impact on health care spending? What do the results suggest about the relation between income and health care spending?

c. Supposing that both P and E are measured in dollars, interpret the coefficient estimate on P.

d. What does the coefficient estimate on A suggest about the relation between age and health care spending?

e. Can you think of any omitted variables that might cause our estimates to be suspect?

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