A researcher has data on the aggregate expenditure on services, Y, and aggregate disposable personal income, X, both measured in $ billion at constant prices, for each of the U.S. states and fits the equation
The researcher initially fits the equation using OLS regression analysis. However, suspecting that tax evasion causes both Y and X to be substantially underestimated, the researcher adopts two alternative methods of compensating for the under-reporting:
1. The researcher adds $90 billion to the data for Y in each state and $200 billion to the data for X.
2. The researcher increases the figures for both Y and X in each state by 10 percent.
Evaluate the impact of the adjustments on the regression results.