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