EFM - 1- 8

Econometrics is the branch of economics that

• studies the behavior of individual economic agents in making economic decisions

• develops and uses statistical methods for estimating economic relationships

• deals with the performance, structure, behavior, and decision-making of an economy as a whole

• applies mathematical methods to represent economic theories and solve economic problems.

What is the estimated value of the slope parameter when the regression equation, y = β0 + β1x1 + u  passes through the origin?

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A natural measure of the association between two random variables is the correlation coefficient.

• True

• False

In a regression model, if variance of the dependent variable, y, conditional on an explanatory variable, x, or Var(y|x), is not constant,

• the t statistics are invalid and confidence intervals are valid for small sample sizes

• the t statistics are valid and confidence intervals are invalid for small sample sizes

• the t statistics confidence intervals are valid no matter how large the sample size is

• the t statistics and confidence intervals are both invalid no matter how large the sample size is

If estimated (Bj) is an OLS estimator of a regression coefficient associated with one of the

β explanatory variables, such that j= 1, 2, …., n, asymptotic standard error of^ j

will refer to the:

• estimated variance of estimated(Bj) when the error term is normally distributed.

• estimated variance of a given coefficient when the error term is not normally distributed.

• square root variance of estimated(Bj) when the error term is normally distributed.

• square root variance of estimated(Bj) when the error term is not normally distributed.

The sample covariance between the regressors and the Ordinary Least Square (OLS) residuals is always positive.

• True

• False

Nonexperimental data is called

• cross-sectional data

• time series data

• observational data

• panel data

Nonexperimental data is called

• cross-sectional data

• time series data

• observational data

• panel data

In a multiple regression model, the OLS estimator is consistent if:

• there is no correlation between the dependent variables and the error term.

• there is a perfect correlation between the dependent variables and the error term.

• the sample size is less than the number of parameters in the model.

• there is no correlation between the independent variables and the error term.

Which of the following is true of dummy variables?

• A dummy variable always takes a value less than 1.

• A dummy variable always takes a value higher than 1.

• A dummy variable takes a value of 0 or 1.

• A dummy variable takes a value of 1 or 10.