Problem Set 1 Answer Key  Econometrics 120A
1. (a) Using the AVERAGE function in Excel we get 0.84 for the mean of GDP growth. Using the
MEDIAN function in Excel we get 0.79 for GDP growth.
(b) Since the mean is higher than the median, the distribution seems to be skewed to the right.
(c) Using the VAR function in Excel we ﬁnd the standard deviation (
s
2
) to be 0.978 for GDP growth.
To ﬁnd the mean squared deviation (MSD), we can use the fact that
MSD
2
=
n
n

1
s
2
= 0
.
974, which
implies
MSD
= 0
.
974. The MSD and
s
2
are close to each other because the sample size is large.
Since the numbers are practically the same, it does not matter which one we use.
(d) The Standard Deviation gives us an idea of how variable growth is (the spread), while the mean
and median only tell us what “typical” growth is.
(e) Histogram (as presented in class)
2. This can be explained if Paul Samuelson’s IQ is higher than that of the average economist, but lower
than that of the average Physicist.
(216) (a) Mean is not typical since the wife jogs 10 miles, while the husband does not jog at all.
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 Spring '10
 M.Abajian
 Econometrics, Standard Deviation, Mean

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