Question

A regression model is used to forecast sales based on advertising dollars spent. The regression line is y=500+35x and the coefficient of determination is .90. Which is the best statement about this forecasting model?a. For every $35 spent on advertising, sales increase by $1.

b. Even if no money is spent on advertising, the company realizes $35 of sales.
c. The correlation between sales and advertising is positive.
d. The coefficient of correlation between sales and advertising is 0.81.

Answer 1

The correlation between sales and advertising is positive.

Explanation:

For every $35 spent on advertising, sales increase by $1

Is FALSE, since y = 500 + 35 x $35, sales increase more than $1

Even if no money is spent on advertising, the company realizes $35 of sales

Is FALSE, if no money is spent, the sales amount to $ 500 (when X = 0)

The coefficient of correlation between sales and advertising is 0.81

Is FALSE, since R² = 0.9. The coefficient of correlation = R = 0.94, not 0.81