In the following equation, gdp refers to gross domestic product, and FDI refers to foreign direct investment.
log(gdp) = 2.65 + 0.527log(bankcredit) + 0.222FDI
(0.13) (0.022) (0.017)
?
Which of the following statements is then true?
A. If FDI increases by 1%, gdp increases by approximately 22.2%, the amount of bank credit remaining constant.
B. If FDI increases by 1%, gdp increases by approximately 26.5%, the amount of bank credit remaining constant.
C. If FDI increases by 1%, gdp increases by approximately 24.8%, the amount of bank credit remaining constant.
D. If FDI increases by 1%, gdp increases by approximately 52.7%, the amount of bank credit remaining constant.
Answer: C
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