Question 1

A dummy variable trap arises when a single dummy variable describes a given number of groups.

Accepted Answer

A) True 
 B)False  False

Question 2

The sum of squared residuals form of the F statistic can be computed easily even when many independent variables are involved; this particular F statistic is usually called the _____ in econometrics.

Accepted Answer

A) Chow statistic 
B) t statistic 
C)  ​
  statistic 
D)  ​LM statistic 
A) Chow statistic 
B) t statistic 
C)  ​
  statistic 
D)  ​LM statistic A

Question 3

The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education. Savings = β0 +   0 Edu + β1Inc + u
The variable 'Edu' takes a value of 1 if the person is educated and the variable 'Inc' measures the income of the individual.
​
Refer to the model above. The benchmark group in this model is _____.

Accepted Answer

A) the group of educated people 
B) the group of uneducated people 
C)  the group of individuals with a high income 
D)  the group of individuals with a low income 
A) the group of educated people 
B) the group of uneducated people 
C)  the group of individuals with a high income 
D)  the group of individuals with a low income B

Question 4

The income of an individual in Budopia depends on his ethnicity and several other factors which can be measured quantitatively. If there are 5 ethnic groups in Budopia, how many dummy variables should be included in the regression equation for income determination in Budopia?

Accepted Answer

A) 1 
B) 5 
C)  6 
D)  4 
A) 1 
B) 5 
C)  6 
D)  4

Question 5

A _____ variable is used to incorporate qualitative information in a regression model.

Accepted Answer

A) dependent 
B) continuous 
C)  binomial 
D)  dummy 
A) dependent 
B) continuous 
C)  binomial 
D)  dummy

Question 6

Which of the following Gauss-Markov assumptions is violated by the linear probability model?

Accepted Answer

A) The assumption of constant variance of the error term. 
B) The assumption of zero conditional mean of the error term. 
C)  The assumption of no exact linear relationship among independent variables. 
D)  The assumption that none of the independent variables are constants. 
A) The assumption of constant variance of the error term. 
B) The assumption of zero conditional mean of the error term. 
C)  The assumption of no exact linear relationship among independent variables. 
D)  The assumption that none of the independent variables are constants.

Question 7

A binary response is the most extreme form of a discrete random variable that takes on:​

Accepted Answer

A) ​only two values, zero and one. 
B) ​only one value, zero. 
C)  ​only one value, one. 
D)  ​any value. 
A) ​only two values, zero and one. 
B) ​only one value, zero. 
C)  ​only one value, one. 
D)  ​any value.

Question 8

A binary variable is a variable whose value changes with a change in the number of observations.

Accepted Answer

A) True 
 B)False

Question 9

A problem that often arises in policy and program evaluation is that individuals (or firms or cities) choose whether or not to participate in certain behaviors or programs.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is true of Chow test?

Accepted Answer

A) It is a type of t test. 
B) It is a type of sign test. 
C)  It is only valid under homoskedasticty. 
D)  It is only valid under heteroskedasticity. 
A) It is a type of t test. 
B) It is a type of sign test. 
C)  It is only valid under homoskedasticty. 
D)  It is only valid under heteroskedasticity.

Question 11

Which of the following is true of dummy variables?

Accepted Answer

A) A dummy variable always takes a value less than 1. 
B) A dummy variable always takes a value higher than 1. 
C)  A dummy variable takes a value of 0 or 1. 
D)  A dummy variable takes a value of 1 or 10. 
A) A dummy variable always takes a value less than 1. 
B) A dummy variable always takes a value higher than 1. 
C)  A dummy variable takes a value of 0 or 1. 
D)  A dummy variable takes a value of 1 or 10.

Question 12

The multiple linear regression model with a binary dependent variable is called the linear probability model.

Accepted Answer

A) True 
 B)False

Question 13

Consider the following regression equation: y =   0+   1x1+ …+   k xk + u In which of the following cases, the dependent variable is binary?

Accepted Answer

A) y indicates the gross domestic product of a country 
B) y indicates whether an adult is a college dropout 
C)  y indicates household consumption expenditure 
D)  y indicates the number of children in a family 
A) y indicates the gross domestic product of a country 
B) y indicates whether an adult is a college dropout 
C)  y indicates household consumption expenditure 
D)  y indicates the number of children in a family

Question 14

Consider the following regression equation: y =   0+   1x1 + … +   kxk + u In which of the following cases, is 'y' a discrete variable?

Accepted Answer

A) y indicates the gross domestic product of a country 
B) y indicates the total volume of rainfall during a year 
C)  y indicates household consumption expenditure 
D)  y indicates the number of children in a family 
A) y indicates the gross domestic product of a country 
B) y indicates the total volume of rainfall during a year 
C)  y indicates household consumption expenditure 
D)  y indicates the number of children in a family

Question 15

Which of the following problems can arise in policy analysis and program evaluation using a multiple linear regression model?

Accepted Answer

A) There exists homoskedasticity in the model. 
B) The model can produce predicted probabilities that are less than zero and greater than one. 
C)  The model leads to the omitted variable bias as only two independent factors can be included in the model. 
D)  The model leads to an overestimation of the effect of independent variables on the dependent variable. 
A) There exists homoskedasticity in the model. 
B) The model can produce predicted probabilities that are less than zero and greater than one. 
C)  The model leads to the omitted variable bias as only two independent factors can be included in the model. 
D)  The model leads to an overestimation of the effect of independent variables on the dependent variable.

Question 16

The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education. Savings = β0 +   0 Edu + β1Inc + u
The variable 'Edu' takes a value of 1 if the person is educated and the variable 'Inc' measures the income of the individual.
​
​
Refer to the above model. If   0 > 0, _____.

Accepted Answer

A) uneducated people have higher savings than those who are educated 
B) educated people have higher savings than those who are not educated 
C)  individuals with lower income have higher savings 
D)  individual with lower income have higher savings 
A) uneducated people have higher savings than those who are educated 
B) educated people have higher savings than those who are not educated 
C)  individuals with lower income have higher savings 
D)  individual with lower income have higher savings

Question 17

The quarterly increase in an employee's salary depends on the rating of his work by his employer and several other factors as shown in the model below: Increase in salary=   0+   0​Rating + other factors. The variable 'Rating' is a(n) _____.

Accepted Answer

A) dependent variable 
B) ordinal variable 
C)  continuous variable 
D)  Poisson variable 
A) dependent variable 
B) ordinal variable 
C)  continuous variable 
D)  Poisson variable

Question 18

In the following regression equation, y is a binary variable: y =   0+   1x1+…   k xk+ u
In this case, the estimated slope coefficient,   measures _____.

Accepted Answer

A) the predicted change in the value of y when x1 increases by one unit, everything else remaining constant 
B) the predicted change in the value of y when x1 decreases by one unit, everything else remaining constant 
C)  the predicted change in the probability of success when x1 decreases by one unit, everything else remaining constant 
D)  the predicted change in the probability of success when x1 increases by one unit, everything else remaining constant 
A) the predicted change in the value of y when x1 increases by one unit, everything else remaining constant 
B) the predicted change in the value of y when x1 decreases by one unit, everything else remaining constant 
C)  the predicted change in the probability of success when x1 decreases by one unit, everything else remaining constant 
D)  the predicted change in the probability of success when x1 increases by one unit, everything else remaining constant

Question 19

The parameters in a linear probability model can be interpreted as measuring the change in the probability that y = 1 due to a one-unit increase in an explanatory variable.​

Accepted Answer

A) True 
 B)False

Question 20

In a regression model, which of the following will be described using a binary variable?

Accepted Answer

A) Whether it rained on a particular day or it did not 
B) The volume of rainfall during a year 
C)  The percentage of humidity in air on a particular day 
D)  The concentration of dust particles in air 
A) Whether it rained on a particular day or it did not 
B) The volume of rainfall during a year 
C)  The percentage of humidity in air on a particular day 
D)  The concentration of dust particles in air

A dummy variable trap arises when a single dummy variable describes a given number of groups.

The sum of squared residuals form of the F statistic can be computed easily even when many independent variables are involved; this particular F statistic is usually called the _____ in econometrics.

The income of an individual in Budopia depends on his ethnicity and several other factors which can be measured quantitatively. If there are 5 ethnic groups in Budopia, how many dummy variables should be included in the regression equation for income determination in Budopia?

A _____ variable is used to incorporate qualitative information in a regression model.

Which of the following Gauss-Markov assumptions is violated by the linear probability model?

A binary response is the most extreme form of a discrete random variable that takes on:

A binary variable is a variable whose value changes with a change in the number of observations.

A problem that often arises in policy and program evaluation is that individuals (or firms or cities) choose whether or not to participate in certain behaviors or programs.

Which of the following is true of Chow test?

Which of the following is true of dummy variables?

The multiple linear regression model with a binary dependent variable is called the linear probability model.

Consider the following regression equation: y = ₀+ ₁x₁+ …+ _k x_k+ u In which of the following cases, the dependent variable is binary?

Consider the following regression equation: y = ₀+ ₁x₁+ … + _kx_k+ u In which of the following cases, is 'y' a discrete variable?

Which of the following problems can arise in policy analysis and program evaluation using a multiple linear regression model?

The quarterly increase in an employee's salary depends on the rating of his work by his employer and several other factors as shown in the model below: Increase in salary= 0+ 0Rating + other factors. The variable 'Rating' is a(n) _____.

In the following regression equation, y is a binary variable: y = ₀+ ₁x₁+… _k x_k+ u In this case, the estimated slope coefficient, measures _____.

The parameters in a linear probability model can be interpreted as measuring the change in the probability that y = 1 due to a one-unit increase in an explanatory variable.

In a regression model, which of the following will be described using a binary variable?

The Nature of Econometrics and Economic Data

The Simple Regression Model

Multiple Regression Analysis: Estimation

Multiple Regression Analysis: Inference

Multiple Regression Analysis: Ols Asymptotics

Multiple Regression Analysis: Further Issues

Heteroskedasticity

More on Specification and Data Problems

Basic Regression Analysis With Time Series Data

Further Issues in Using Ols With Time Series Data

Serial Correlation and Heteroskedasticity in Time Series Regressions

Pooling Cross Sections Across Time: Simple Panel Data Methods

Advanced Panel Data Methods

Instrumental Variables Estimation and Two Stage Least Squares

Simultaneous Equations Models

Limited Dependent Variable Models and Sample Selection Corrections

Advanced Time Series Topics

Carrying Out an Empirical Project

Filters

Exam 7: Multiple Regression Analysis With Qualitative Information: Binary or Dummy Variables

A dummy variable trap arises when a single dummy variable describes a given number of groups.

The sum of squared residuals form of the F statistic can be computed easily even when many independent variables are involved; this particular F statistic is usually called the _____ in econometrics.

The income of an individual in Budopia depends on his ethnicity and several other factors which can be measured quantitatively. If there are 5 ethnic groups in Budopia, how many dummy variables should be included in the regression equation for income determination in Budopia?

A _____ variable is used to incorporate qualitative information in a regression model.

Which of the following Gauss-Markov assumptions is violated by the linear probability model?

A binary response is the most extreme form of a discrete random variable that takes on:​

A binary variable is a variable whose value changes with a change in the number of observations.

A problem that often arises in policy and program evaluation is that individuals (or firms or cities) choose whether or not to participate in certain behaviors or programs.

Which of the following is true of Chow test?

Which of the following is true of dummy variables?

The multiple linear regression model with a binary dependent variable is called the linear probability model.

Consider the following regression equation: y = 0+ 1x1+ …+ k xk + u In which of the following cases, the dependent variable is binary?

Consider the following regression equation: y = 0+ 1x1 + … + kxk + u In which of the following cases, is 'y' a discrete variable?

Which of the following problems can arise in policy analysis and program evaluation using a multiple linear regression model?

The quarterly increase in an employee's salary depends on the rating of his work by his employer and several other factors as shown in the model below: Increase in salary= 0+ 0​Rating + other factors. The variable 'Rating' is a(n) _____.

In the following regression equation, y is a binary variable: y = 0+ 1x1+… k xk+ u In this case, the estimated slope coefficient, measures _____.

The parameters in a linear probability model can be interpreted as measuring the change in the probability that y = 1 due to a one-unit increase in an explanatory variable.​

In a regression model, which of the following will be described using a binary variable?

The Nature of Econometrics and Economic Data

The Simple Regression Model

Multiple Regression Analysis: Estimation

Multiple Regression Analysis: Inference

Multiple Regression Analysis: Ols Asymptotics

Multiple Regression Analysis: Further Issues

Heteroskedasticity

More on Specification and Data Problems

Basic Regression Analysis With Time Series Data

Further Issues in Using Ols With Time Series Data

Serial Correlation and Heteroskedasticity in Time Series Regressions

Pooling Cross Sections Across Time: Simple Panel Data Methods

Advanced Panel Data Methods

Instrumental Variables Estimation and Two Stage Least Squares

Simultaneous Equations Models

Limited Dependent Variable Models and Sample Selection Corrections

Advanced Time Series Topics

Carrying Out an Empirical Project

Filters

A binary response is the most extreme form of a discrete random variable that takes on:

Consider the following regression equation: y = ₀+ ₁x₁+ …+ _k x_k+ u In which of the following cases, the dependent variable is binary?

Consider the following regression equation: y = ₀+ ₁x₁+ … + _kx_k+ u In which of the following cases, is 'y' a discrete variable?

The quarterly increase in an employee's salary depends on the rating of his work by his employer and several other factors as shown in the model below: Increase in salary= 0+ 0Rating + other factors. The variable 'Rating' is a(n) _____.

In the following regression equation, y is a binary variable: y = ₀+ ₁x₁+… _k x_k+ u In this case, the estimated slope coefficient, measures _____.

The parameters in a linear probability model can be interpreted as measuring the change in the probability that y = 1 due to a one-unit increase in an explanatory variable.