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State the general relationship between consumption Y and disposable income X in ( a ) exact...

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Statistics

State the general relationship between consumption Y anddisposable income X in ( a ) exact linear form and ( b ) stochasticform. ( c ) Why would you expect most observed values of Y not tofall exactly on a straight line?

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The purely mathematical model for consumption is of limitedinterest to the econometrician for it assumes that there is anexact relationship between consumption and income But relationshipbetween economic variables is generally inexact Thus if we were toobtain data on consumption expenditure and disposable income andgraph these data on graph paper with consumption expenditure on thevertical axis and    See Answer
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