In the following equation, gdp refers to gross domestic product, and FDI refers

Question

In the following equation, gdp refers to gross domestic product, and FDI refers to foreign direct investment. log(gdp) 2.65 0.527log(bankcredit) 0.222FDI (0.13) (0.022) (0.017) Which of the following statements is then true? If gdp increases by 1%, bank credit increases by 0.527%, the level of FDI remaining constant If bank credit increases by 1%, gdp increases by 0.527%, the level of FDI remaining constant. If gdp increases by 1%, bank credit increases by log(0.527)%, the level of FDI remaining constant. O If bank credit increases by 1%, gdp increases by log(0.527%, the level of FDI remaining constant.

Explanation / Answer

(first part) right choicei is second

since both gdp and bank credit are log scaled so, unit change in bank credit will increase 0.527 change in gdp

(second part) right choice is fourth

taking log is more responsive for slope

(third) right choice is third

the standardized formula z=(x-mean)/sd

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