Chap 6

the standard error of the regression

• the standard error of the regression
• the sum of squared residuals of the regression
• the goodness-of-fit of the regression
• confidence intervals of the regression

Changing the unit of measurement of any independent variable, where log of the dependent variable appears in the regression

• affects only the intercept coefficient
• affects only the slope coefficient
• affects both the slope and intercept coefficients.
• affects neither the slope nor the intercept coefficient

A variable is standardized in the sample

• by multiplying by its mean
• by subtracting off its mean and multiplying by its standard deviation
• by subtracting off its mean and dividing by its standard deviation
• by multiplying by its standard deviation

Standardized coefficients are also referred to as

• beta coefficients
• y coefficients
• alpha coefficients
• j coefficients

If a regression equation has only one explanatory variable, say x1, its standardized coefficient must lie in the range

• -2 to 0
• -1 to 1
• 0 to 1
• 0 to 2

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?

• If gdp increases by 1%, bank credit increases by 0.527%, the level of FDI remaining constant
• If bank credit increases by 1%, gdp increases by 0.527%, the level of FDI remaining constant
• If gdp increases by 1%, bank credit increases by log(0.527)%, the level of FDI remaining constant
• If bank credit increases by 1%, gdp increases by log(0.527)%, the level of FDI remaining constant

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?

• If FDI increases by 1%, gdp increases by approximately 22.2%, the amount of bank credit remaining constant.
• If FDI increases by 1%, gdp increases by approximately 26.5%, the amount of bank credit remaining constant
• If FDI increases by 1%, gdp increases by approximately 24.8%, the amount of bank credit remaining constant
• If FDI increases by 1%, gdp increases by approximately 52.7%, the amount of bank credit remaining constant

Which of the following statements is true when the dependent variable, y > 0?

• Taking log of a variable often expands its range
• Models using log(y) as the dependent variable will satisfy CLM assumptions more closely than models using the level of y
• Taking log of variables make OLS estimates more sensitive to extreme values
• Taking logarithmic form of variables make the slope coefficients more responsive to rescaling

Which of the following correctly identifies a limitation of logarithmic transformation of variables

• Taking log of variables make OLS estimates more sensitive to extreme values in comparison to variables taken in level
• Logarithmic transformations cannot be used if a variable takes on zero or negative values
• Logarithmic transformations of variables are likely to lead to heteroskedasticity
• Taking log of a variable often expands its range which can cause inefficient estimates

Which of the following models is used quite often to capture decreasing or increasing marginal effects of a variable

• Models with logarithmic functions
• Models with quadratic functions
• Models with variables in level
• Models with interaction terms