To study the relationship between capacity utilization in manufacturing and inflation in the united states, Thomas Gittings obtained the following regression results based on the annual data from 1971-1988:
Y(sub(t))= -70.85 + .8880X(sub (t))
t= (-5.89) (5.90) r^2= 0.685
where Y= changes in inflation as measured by the wholesale price index and X= capacity utilization rate.
a. a priori, would you expect a positive relationship between Y and X? WHY? specific
b.how would you interpret the slope coefficient? specifics!
c. is the estimated slope coefficient statistically significant?
d. is it statistically different from unity?
e.the natural rate of capacity utilization is defined as the rate at which Y is zero. what is the rate for the period under study?