Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) In nonlinear models, the expected change in the dependent variable for a change in one of the explanatory
variables is given by
.
A)
B)
.
C)
D)
.
.
is as follows: a
2) The interpretation of the slope coefficient in the model
A) change in X by one unit is associated with a
change in Y.
B) change in X by one unit is associated with a 100
C) 1% change in X is associated with a
% change in Y.
% change in Y.
D) 1% change in X is associated with a change in Y of 0.01
.
3) By including another variable in the regression, you will
A) decrease the variance of the estimator of the coefficients of interest.
B) decrease the regression R2 if that variable is important.
C) eliminate the possibility of omitted variable bias from excluding that variable.
D) look at the t-statistic of the coefficient of that variable and include the variable only if the coefficient is
statistically significant at the 1% level.
4) In the case of regression with interactions, the coefficient of a binary variable should be interpreted as
follows:
A) first set all explanatory variables to one, with the exception of the binary variables. Then allow for
each of the binary variables to take on the value of one sequentially. The resulting predicted value
indicates the effect of the binary variable.
B) there are really problems in interpreting these, since the ln(0) is not defined.
C) first compute the expected values of Y for each possible case described by the set of binary variables.
Next compare these expected values. Each coefficient can then be expressed either as an expected
value or as the difference between two or more expected values.
D) for the case of interacted regressors, the binary variable coefficient represents the various intercepts
for the case when the binary variable equals one.
1
5) In the regression model
, where X is a continuous variable and
D is a binary variable,
A) has a standard error that is not normally distributed even in large samples since D is not a normally
distributed variable.
B) indicates the difference in the slopes of the two regressions.
C) indicates the slope of the regression when D=1.
D) has no meaning since
when Di = 0.
6) To decide whether
or
fits the data better, you cannot consult
the regression R2 because
A) the TSS are not measured in the same units between the two models.
B) the regression can be greater than one in the second model.
C) the slope no longer indicates the effect of a unit change of X on Y in the log-linear model.
D) ln(Y) may be negative for 0<Y<1.
7) A survey of earnings contains an unusually high fraction of individuals who state their weekly earnings in
100s, such as 300, 400, 500, etc. This is an example of
A) companies that typically bargain with workers in 100s of dollars.
B) errors-in-variables bias.
C) simultaneous causality bias.
D) sample selection bias.
8) Simultaneous causality bias
A) results in biased estimators if there is heteroskedasticity in the error term.
B) arises in a regression of Y on X when, in addition to the causal link of interest from X to Y, there is a
causal link from Y to X.
C) happens in complicated systems of equations called block recursive systems.
D) is also called sample selection bias.
9) Sample selection bias
A) occurs when a selection process influences the availability of data and that process is related to the
dependent variable.
B) is more important for nonlinear least squares estimation than for OLS.
C) is only important for finite sample results.
D) results in the OLS estimator being biased, although it is still consistent.
10) Errors-in-variables bias
A) arises when an independent variable is measured imprecisely.
B) is present when the probability limit of the OLS estimator is given by
C) always occurs in economics since economic data is never precisely measured.
D) arises when the dependent variable is measured imprecisely.
2
.
Answer Key
Testname: PS4.TST
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
B
C
C
C
B
A
B
B
A
A
1