ProblemSet2 - Professor Mumford [email protected] Econ 360...

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Professor Mumford Econ 360 - Fall 2010 [email protected] Problem Set 2 Due at the beginning of class on Tuesday, September 7 True/False (20 points) Please write the entire word. No explanations are required. 1. If E ( u | x ) = E ( u ) then we say that u is mean independent of x . 2. The goodness-of-fit measure for OLS regressions, R -Squared, depends on the unit of measurement of the variables. 3. Under assumption SLR.1 - SLR.4, the OLS estimates equal the true population pa- rameters. 4. The average value of the residuals is zero. 5. The zero conditional mean assumption implies that u i = 0 for all i regardless of the value of x i . 1
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(20 points) 6. In the following estimated regression equation ln ( wage ) = 0 . 584 + 0 . 083 educ where educ is measured in years of education, how does one more year of education affect the predicted wage? (a) wage increases by $0.083 (b) wage increases by $8.30 (c) wage increases by 0.083 percent (d) wage increases by 8.3 percent 7. Which is NOT a correct representation of R -squared? (a) u 2 i (b) SSE SST (c) 1 - SSR SST (d) square of the sample correlation between y i and ˆ y i 8. When an explanatory variable is correlated with the error term then it is said to be (a) independent (b) endogenous (c) statistically significant (d) observational 9. Which of the following assumptions is NOT one of the four assumptions needed to show that the OLS estimates are unbiased? (a) independence (b) zero conditional mean (c) linear in parameters (d) sample variation in the explanatory variable 10. Which of the following population models violates Assumption SLR.1 (Linear in Pa- rameters)? (a)
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This note was uploaded on 02/06/2012 for the course ECON 360 taught by Professor Na during the Spring '10 term at Purdue University.

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ProblemSet2 - Professor Mumford [email protected] Econ 360...

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