Suppose your supervisor has asked you to fit a multiple linear regression model
ID: 3261894 • Letter: S
Question
Suppose your supervisor has asked you to fit a multiple linear regression model to predict the amount of money consumers report spending on gifts during the holiday season ("spending") to the X variables of age and monthly income. You fit the model and obtain an r-squared value of 0.746. Then, your supervisor tells you to add one more variable to the model, holiday spending the previous year ("previous_spent"). Nothing else is changed about the fitted model. Which of the following values could not be the value of r-squared for the model with the additional variable "previous_spent"? Hint: There is nothing to calculate here. Use what you know about r-squared to answer the question.
0.786
0.992
0.815
0.732
0.921
0.786
0.992
0.815
0.732
0.921
Explanation / Answer
The answer is 0.732. Because adding more variable into the regression equation there is increase in R squared. Hence if we add one variable then R squared is always grater than 0.746
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