T1 - Y however in the real world it is unlikely that...

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Tutorial 1 Question 1 Diagnostic testing of the general model (test 1-3) Test 1: does nor suffer from any diagnostic problem Test 2: restriction test implies by the specific model against the general model- either by exclusion test of other test linear restriction. Test 3: if the restriction model is accepte, tets its residuals to ensure that this more specific model it still acceptable on diagnostic grounds. Question 2 Random error A random error must be included in the exact relationships postulated by economic theory and mathematical economics in order to make them stochastic. So, to account for the inexact relationship between economic variables, an error term must be included y = α 0 + β 2 x + ε This tells us exactly by how much change in X will be reflect in the changes in
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Unformatted text preview: Y. however, in the real world, it is unlikely that variation in Y is solely explained by variation in X. There are some variations in Y that cannot be explained by the model. The unexplained variation by explicitly existence including a stochastic in the model. Question 3 a. Y is the change in H cause by increase in a unit Y, holding P constant b. Y and (+ve) P and H (-ve) Because the more country has the more they probably spend on public hospital. But the population is growing (higher birth rate) , the less there would be to spend in each pupil. c. Rewrite the answer in b. but put in the amount number. Question 4...
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