# 120 F2 - Final Practice Problems Econometrics 120A 1 The...

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Final Practice Problems - Econometrics 120A 1. The following is a fictional joint probability distribution for GDP growth in the US and China. US GDP growth is entered in the left most column, and Chinese GDP growth in the top most row. US/China -2% 3% 10% -1% 0.1 0 0 2% 0.2 0.2 0.2 5% 0 0.1 0.2 (a) What is the probability that Chinese GDP growth is 3%? What is the probability that Chinese GDP growth is 10%? (b) Conditional on Chinese GDP growth being 10%, what is the probability that US GDP growth is 5%? (c) Are the US and Chinese GDP growth independent? (d) Notice that P (US GDP growth = 5%) = 0.3. Looking at your answer to b), an economist argues that high Chinese GDP growth causes US GDP growth to be high. Are the numbers in this table enough to support his conclusion? 2. Suppose the US unemployment rate follows a normal distribution with mean 4% and standard devi- ation 5%. (a) What is the probability of observing an unemployment rate larger than 7%? (b) What is the probability that the unemployment rate is between 1% of its mean? (i.e. between 3% and 5%?)

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