Question 4.151

53. Does it Pay to Stay in School? Refer to your work from Exercise 38. For parts (a)−(c), if appropriate, use your regression equation to estimate the unemployment for individuals with the following years of education. If it is not appropriate, clearly state why not.

  1. 10 years
  2. 15 years
  3. 20 years
  4. Calculate the prediction error for your prediction in part (a). Does this data point lie above or below the regression line, and what does that mean?

4.2.53

(a) 13.79 (b) 7.59 (c) 20 years is outside of the range of the data set. (d) The result in part (a) is the predicted unemployment rate for individuals with 10 years of education while 20.6 is the actual unemployment rate for individuals with 10 years of education. 6.81, above the regression line. The observed unemployment rate of 20.6 is greater than the predicted unemployment rate of 13.79 for 10 years of education.