Question 1

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. C

Question 2

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 D

Question 3

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

Accepted Answer

A) True 
 B)False  False

Question 4

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

Accepted Answer

A) There exists homoscedasticity 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 5

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

Accepted Answer

A) True 
 B)False

Question 6

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= β0+∂0Rating + other factors.The variable 'Rating' is a(n)_____ variable.

Accepted Answer

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

Question 7

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

Question 8

Consider the following regression equation: y = β0+β1x1+…βkxk+ 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

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

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.

Question 12

Refer to the model above.The inclusion of another binary variable in this model that takes a value of 1 if a person is uneducated,will give rise to the problem of _____.

Accepted Answer

A) omitted variable bias 
B) self-selection 
C) dummy variable trap 
D) heteroskedastcity

Question 13

The dummy variable coefficient for a particular group represents the estimated difference in intercepts between that group and the base group.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

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

Accepted Answer

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

Question 16

Consider the following regression equation: y = β0+β1x1+…βkxk+ 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

Question 17

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

Question 18

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

Question 19

In the following regression equation,y is a binary variable: y= β0+β1x1+…βkxk+ 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

Question 20

Which of the following is true of dependent variables?

Accepted Answer

A) A dependent variable can only have a numerical value. 
B) A dependent variable cannot have more than 2 values. 
C) A dependent variable can be binary. 
D) A dependent variable cannot have a qualitative meaning.

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

Which of the following is true of Chow test?

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

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

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

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= β₀+∂₀Rating + other factors.The variable 'Rating' is a(n) _____ variable.

Refer to the above model.If ∂₀ > 0,_____.

Consider the following regression equation: y = β₀+β₁x₁+…β_kx_k+ u In which of the following cases,is 'y' a discrete variable?

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

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

Refer to the model above.The inclusion of another binary variable in this model that takes a value of 1 if a person is uneducated,will give rise to the problem of _____.

The dummy variable coefficient for a particular group represents the estimated difference in intercepts between that group and the base group.

Which of the following is true of dummy variables?

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

Consider the following regression equation: y = β₀+β₁x₁+…β_kx_k+ u In which of the following cases,the dependent variable is binary?

Refer to the model above.The benchmark group in this model is _____.

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

In the following regression equation,y is a binary variable: y= β₀+β₁x₁+…β_kx_k+ u In this case,the estimated slope coefficient, measures _____.

Which of the following is true of dependent variables?

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

Which of the following is true of Chow test?

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

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

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

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= β0+∂0Rating + other factors.The variable 'Rating' is a(n) _____ variable.

Refer to the above model.If ∂0 > 0,_____.

Consider the following regression equation: y = β0+β1x1+…βkxk+ u In which of the following cases,is 'y' a discrete variable?

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

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

Refer to the model above.The inclusion of another binary variable in this model that takes a value of 1 if a person is uneducated,will give rise to the problem of _____.

The dummy variable coefficient for a particular group represents the estimated difference in intercepts between that group and the base group.

Which of the following is true of dummy variables?

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

Consider the following regression equation: y = β0+β1x1+…βkxk+ u In which of the following cases,the dependent variable is binary?

Refer to the model above.The benchmark group in this model is _____.

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

In the following regression equation,y is a binary variable: y= β0+β1x1+…βkxk+ u In this case,the estimated slope coefficient, measures _____.

Which of the following is true of dependent variables?

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= β₀+∂₀Rating + other factors.The variable 'Rating' is a(n) _____ variable.

Refer to the above model.If ∂₀ > 0,_____.

Consider the following regression equation: y = β₀+β₁x₁+…β_kx_k+ u In which of the following cases,is 'y' a discrete variable?

Consider the following regression equation: y = β₀+β₁x₁+…β_kx_k+ u In which of the following cases,the dependent variable is binary?

In the following regression equation,y is a binary variable: y= β₀+β₁x₁+…β_kx_k+ u In this case,the estimated slope coefficient, measures _____.