ExamFinal2006_solutions

# ExamFinal2006_solutions - Introduction to Applied...

This preview shows pages 1–4. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Page 2 of 7 [2 points] 1 . Suppose you have a dataset for Y, X, and Z that includes 90 observations. You decide to estimate the following model: 0 1 2 3 1 4 2 5 3 t t t t t t t Y Z X X X X β β β β β β ε - - - = + + + + + + How many degrees of freedom will you have for this estimation? You wish to estimate 6 coefficients. Also, you must sacrifice 3 data observations in order to make the lagged X variable. Therefore, d.o.f. = 90 – 6- 3 = 81 . [9 points total] 2 . Suppose that you are studying the factors which explain a person’s salary. Your sample is drawn from workers between the ages of 15 and 90. You estimate the following regression: 2 ˆ 20000 500 2000 600 6 i i i i i Salary Educ Female Age Age = + - + - (1) where: Salary is measured in US dollars Educ is the number of years of education Female is a dummy variable equal to 1 for females, 0 otherwise Age is the person’s age (2 point) (a) What is the predicted salary of a 20 year old male with 10 years of education? 2 ˆ 20000 500(10) 2000(0) 600(20) 6(20) 25000 12000 2400 34,600 i Salary = + - + - = + - = (2 points) (b) Consider the Age variable. According to the estimated model, at what age do people earn maximum salaries? ˆ 600 2*6* 0 600 50 12 i Salary Age Age Age = - = = =
Page 3 of 7 #2 continued from the previous page (5 points) (c) Consider the Educ variable. Suppose you decide to create three new dummy variables: Educ1 =1 for those with 0-12 years of education, 0 otherwise Educ2 =1 for those with 13-16 years of education, 0 otherwise

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern