PRC-2 · Chapter 10 · Question 47 of 60
If the correlation coefficient (r) between two economic variables is exactly -0.70, what is the resulting 'coefficient of determination', and what does it signify?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 0.49; meaning 49% of the variation in the dependent variable is mathematically explained by the independent variable.
Explanation
The coefficient of determination is calculated by squaring r. (-0.70)^2 = 0.49. This metric clearly indicates that 49% of the variance in variable Y can be reliably explained by its linear relationship with variable X.
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