Question: The following are data on
y = quit rate per 100 employees in manufacturing
x = unemployment rate The data are for the United States and cover the period 1960-1972.
(a) Calculate a regression of y on x.
y = α + βx + u
(b) Construct a 95% confidence interval for β.
(c) Test the hypothesis Ho: β = 0 against the alternative β ≠ 0 at the 5% significance level.
(d) Construct a 90% confidence interval for (σ2 = var(u).
(e) What is likely to be wrong with the assumptions of the classical normal linear model in this case? Discuss.