Table 126 On The Textbooks Web Site Gives Data On

Table 12-6 (on the textbook’s Web site) gives data on personal consumption expenditure (PCE) and personal disposable income (PDI) for the United States for 1970 to 2007; all figures are in billions of dollars.
Estimate the following models:
PCEt = A1 + A2PDIt + ut
PCEt = B1 + B2PDI, + B3PCEt-1 + vt
a. Interpret the results of the two regressions.
b. What is the short- and long-run marginal propensity to consume (MPC)?

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