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Unformatted text preview: Economics 120B Name: _________________________ Professor Yongil Jeon September 6, 2006 Student ID#: _________________________ Answer to Exam 2 Summer 2006: Econometrics 120B 1-a. (5 points) Testing for the statistical significance of the relationship between the dependent and independent variable in small samples A) does not depend on sample size. B) is accomplished by application of the t-distribution. C) is accomplished by testing the null hypothesis: H : 0. D) is accomplished by application of the normal distribution. E) depends on the size of the intercept term. Answer: B 1-b. (5 points) Two data sets that have the exact same estimated linear regression must be the same data. A) True. B) False. Answer: B 1-c. (5 points) Which of the following is not an indicator of regression fit? A) Does the estimated sign of the slope coefficient make economic sense? B) Is R-squared greater than one? C) Is the model underspecified? D) Are X and Y significantly related? Answer: B 1-d. (5 points) Stock price data show periods of relatively calm interrupted by periods of enhanced price volatility. This suggests stock price data are A) homoscedastic. B) autocorrelated. C) nonlinear. D) heteroscedastic. E) linear. Answer: D 2 Answer to EXAM #2, ECON 120B, Summer 2006 2 2. (5 points) Evaluate the following statement: In all of the regressions, the coefficient on Female is negative, large, and statistically significant. This provides strong statistical evidence of gender discrimination in the U.S. labor market. Answer In isolation, these results do imply gender discrimination. Gender discrimination means that two workers, identical in every way but gender, are paid different wages. It is also important to control for characteristics of the workers that may affect their productivity (education, years of experience, etc). If these characteristics are systematically different between men and women, then they may be responsible for the difference in mean wages. These are potentially important omitted variable in the regression that will lead to bias in the OLS coefficient estimator for Female. Since these characteristics were not controlled for in the statistical analysis, it is premature to reach a conclusion about gender discrimination. 3. (5 points) A Cobb-Douglas production function relates Production (Q) to factors of production, capital (K), labor (L), and raw materials (M), and an error term u using the question u e M L K Q 3 2 1 = , where 2 1 , , and 3 are production parameters. Suppose you have data on production and the factors of production from a random sample of firms with the same Cobb Douglas production function. How would you use regression analysis to estimate the production parameters?...
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