Economics 120B Name: _________________________ Professor Yongil Jeon Winter 2008, March 3 Student ID#: _________________________ Answer to Exam #2 – Winter 2008: Econometrics 120B 1.(15 points)A multiple regression includes two regressors: iiiiXXYεβββ+++=22110(i) What is the expected change in iYif iX1increases by 3 units and iX2unchanged? (ii) What is the expected change in iYif iX2decreased by 5 units and iX1is unchanged? (iii) What is the expected change in iYif iX1increases by 3 units and iX2decreased by 5 units? AnswerIf iX1increases by 3 units and iX2unchanged, then iYis expected to change by 13βunits. If iX2decreased by 5 unites and iX1is unchanged, then iYis expected to change by 25β−units. If iX1increases by 3 units and iX2decreased by 5 unites, then iYis expected to change by 2153ββ−units. 2. (15 points) Consider the regression model iiiiuXXY+++=22110βββ. Transform the regression to use a t-statistic to get121ββ+= −. Answer 121ββ+= −(Hint: You must define the dependent variable in the regression).0121θββ=++. Thus, 1021βθβ=−−002122(1)iiiiYXXuβθββ=+−−++()1001221iiiiiiYXXXXuβθβ+=++−+And test whether 00=θ.
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