A. What is the correlation coefficient ‘r’and coefficient of determination 'r2' between
GDP and economic growth ? (3 marks)
Answers
Explanation:
There is a direct connection and linear type: y = a + bx + ε between
Gross Domestic Product / capita and Employment rate of population – as also
results from the graphs inside the article. By the calculations performed using
linear regression model function we get parameters a = - 633,663.4 and b =
11,150.08. The adjustable single regression is yˆ 633.663,4 11.150,08 x x .
Determination report confi rms that the employment rate is a signifi cant
factor (R2 > 50%) for GDP growth/capita, it’s infl uence on the GDP variation is
60,95%. Correlation coeffi cient, ry/x= 0,7806 indicates a strong link between
the two variables. To verify the signifi cance of the linear correlation the t test
(Student) coeffi cient is applied witch verify the hypothesis of the signifi cance
of correlation, so ry/x is statistically signifi cant and analysis model is correctly
specifi ed.
Regression and correlation method emerged as a result of intensive
research in biology that were then extended to socio- economic phenomena.
Method depends on the specifi c phenomena being studied and the amount
of data used. To determinate the trend of a statistical link we use appropiate
analytical function estimating equation that expresses the form of the relati-
onship between the characteristic factor and the result. This function is cal-
led regresion function and its graphic representation is line/ curve regression.
Regression function indicates how the characteristic result of „Y” changes
in conditions where only characteristics of values „X” changes, other factors
being considered with constant action in all cases subject to observation