Assume a country’s personal annual income is estimated by the following regressi

Question

Assume a country’s personal annual income is estimated by the following regression equation: Y= 33,000 + 1,200X 4,000DG , where X = Working Experience (Years); DG=1, if male; DG=0, if female. Which of the following statement is incorrect?

a. DG is a dummy variable for gender.

b. A female with 10 years working experience is supposed to earn $45,000 per year.

c. A male with 10 years working experience is supposed to earn $41,000 per year.

d. The regression equation indicates that male dominates in personal annual income.

b. A female with 10 years working experience is supposed to earn $45,000 per year.

c. A male with 10 years working experience is supposed to earn $41,000 per year.

d. The regression equation indicates that male dominates in personal annual income.

Explanation / Answer

DG=1 for male and DG=0 for female

Since regression equation has negative sign with DG,so for male with DG=1,income will be less than female (other things remaining constant).Hence the regression equation indicates that female dominates in personal annual income.

So statement d is incorrect.

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