Question 2.125

2.125 Look at the residuals

Refer to the previous exercise. Figure 2.25 is a plot of the residuals versus year.

  1. Interpret the residual plot.
  2. Explain how this plot highlights the deviations from the least-squares regression line that you can see in Figure 2.24.
Figure 2.25: FIGURE 2.25 Plot of residuals versus year for an individual who receives approximately a 5% raise each year for 20 years, Exercise 2.125.