From the linear model we find expected u

.

Question 2

1. 
   The regression analysis of the model applied to find the impact of job vacancy rate, liberalization of National Insurance Act to unemployment rate:
   

_t=2.733071+ 1.166748D_t - 1.512592 V_t - 0.8679296 (D_t V_t) + u_t

SE=0.1014171 0.3178185 0.1210127 0.4305652

T= 29.95 3.67 -12.50 -2.02

R² = 0.9122

2. 
   The priori expectation between unemployment and vacancy rate is negative, due to the fact that with the higher unemployment rate, employers tend to slow down advertising vacancies.
   
3. 
   Holding ceteris paribus situation for the variable V_t, the mean unemployment rate for the period after the liberalization of National Insurance Act is 2.733071+1.166748=3.899819. Also, the dummy variable is statistically significant and the rate of unemployment is higher beginning from IV-quarter of 1996 compared to the figures of prior to IV-quarter of 1996.
   
4. 
   The model says that making the unemployment benefit more generous will lead to the higher unemployment rate. This phenomenon is caused due to the reason that unemployment benefits intuitively force people to stay unemployed.
   

Question 3

1. 
   the multiple linear regression model is given.
   

These are the Hypothesises: