Business statistics conclusion

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Introduction

A conclusive review of the variables and application of regression line to establish the existing relationship between government spending and economic growth exhibit an interesting picture. Government expenditure shows a positive relationship with economic growth. The underlying fact is that government spending is a macroeconomic policy that expands money supply in the economy and simultaneously employs many people. From the linear regression analysis, it can be noted that the coefficient of the existing relationship between government spending and economic growth. The theory of linear regression analysis assumes all other factors held constant while drawing the direction of the relationship between variables. The scatter diagram showed a significant concentration of dots along the regression line as an indication of positive correlation and direct relationship. While government expenditure is theoretically explained as critical in expanding the size of gross domestic product, the statistical tests of significance provide a clear procedure to confirm the underlying reality. In essence, the regression analysis captures many other statistical tools such as the coefficient of determination, denoted with R2 which are critical in making informed judgment in interpretation of the regression line. The regression line representing economic growth as dependent variable and government spending as independent variable shows an upward sloping curve indicating a positive relationship.

The coefficient of determination estimated at 0.99 indicates that the 99% change in dependent variable is explained by the independent variable which in this case is economic growth and government spending respectively. Other assumptions that constitute the linear regression line include heteroscendacity and autocorrelation which are important aspects of error. Considering the variables in question, the assumptions must be included as conditions that help the linear regression line results to reflect practical evidence. Despite possible extraneous variables, the linear regression line proves that government spending positively influences economic growth.

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