1. Which of the following statements is correct?
A) TSS = ESS + SSR
B) ESS = SSR + TSS
C) ESS > TSS
D) R^2 = 1 – (ESS/TSS)
Correct answer(s): A
2. Binary variables
A) are generally used to control for outliers in your sample.
B) can take on more than two values.
C) exclude certain individuals from your sample.
D) can take on only two values.
Correct answer(s): D
3. The following are all least squares assumptions with the exception of:
A) The conditional distribution of given has a mean of zero.
B) The explanatory variable in regression model is normally distributed.
C) (X_i, Y_i) i=1,..n, are independently and identically distributed.
D) Large outliers are unlikely.
Correct answer(s): B
4. The reason why estimators have a sampling distribution is that
A) economics is not a precise science.
B) individuals respond differently to incentives.
C) in real life you typically get to sample many times.
D) the values of the explanatory variable and the error term differ across samples.
Correct answer(s): D
5. In the simple linear regression model, the regression slope
A) indicates by how many percent Y increases, given a one percent increase in X.
B) when multiplied with the explanatory variable will give you the predicted Y.
C) indicates by how many units Y increases, given a one unit increase in X.
D) represents the elasticity of Y on X.
Correct answer(s): C
6.
The OLS estimator is derived by
A) connecting the Yi corresponding to the lowest Xi observation with the Yi corresponding to the
highest Xi observation.
B) making sure that the standard error of the regression equals the standard error of the slope
estimator.
C) minimizing the sum of absolute residuals.
D) minimizing the sum of squared residuals.
Correct answer(s): D
7.
Interpreting the intercept in a sample regression function is
A) not reasonable because you never observe values of the explanatory variables around the
origin.
B) reasonable because under certain conditions the estimator is BLUE.
C) reasonable if your sample contains values of Xi around the origin.
D) not reasonable because economists are interested in the effect of a change in X on the
change in Y.
Correct answer(s): C
8. The sample average of the OLS residuals is
A) some positive number since OLS uses squares.
B) zero.
C) unobservable since the population regression function is unknown.
D) dependent on whether the explanatory variable is mostly positive or negative.
Correct answer(s): B
9. The slope estimator, !1, has a smaller standard error, other things equal, if
A) there is more variation in the explanatory variable, X.
B) there is a large variance of the error term, u.
C) the sample size is smaller.
D) the intercept, !0, is small.
Correct answer(s): A
10. The normal approximation to the sampling distribution of b_1^hat is powerful because
A) many explanatory variables in real life are normally distributed.
B) it allows econometricians to develop methods for statistical inference.
C) many other distributions are not symmetric.
D) is implies that OLS is the BLUE estimator for b_1..
Correct answer(s): B
Done
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