ProblemSet02.pdf - Problem Set 2 EC 420 - Prof. Anderson -...

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Problem Set 2EC 420 - Prof. Anderson - Spring 2021General instructions:Answers are due on D2L byThursday, March 4 at 11:59pm.To facilitate grading, our TA (Ben Miller) will convert all/most ques-tions to a multiple choice quiz on D2L.IN ADDITION TO RECORDING YOUR MULTIPLE CHOICE AN-SWERS ON D2L YOU MUST UPLOAD EVIDENCE SHOWINGYOUR INDIVIDUAL WORK (PLEASE SHOW YOUR WORK INAN EXCEL SPREADSHEET FOR Q1 AND A SINGLE WORD DOC-UMENT FOR Q2-Q3).You may work with classmates and/or ask classmates for help (in ad-dition to asking the TA and instructor). But each student must recordtheir own multiple choice answers and upload their own evidence show-ing individual work. And you may not simply copy someone anotherclassmate’s work.Q1 [13 points; 1 point for each sub-question]:In this problem you willmanuallyprogram Excel to estimate the relationship between a dependentvariable (y) and an independent variable (x) using the OLS formulas forthe slope, intercept, etc. You may verify your results using Stata. However,YOU MUST SUBMIT AN EXCEL SPREADSHEET SHOWING YOURMANUAL CALCULATIONS. See the“Simple Regression Basics” slides forthe numerical example we did in class and the corresponding Excel spread-sheet (SimpleRegressionBasicsNumericalExample-SOLVED.xls) posted onD2L showing how to do the calculations using the relevant Excel functions(e.g., AVERAGE, SUM, SUMPRODUCT, etc).The following table contains the ACT scores and the GPA (grade pointaverage) for eleven college students. GPA is based on a four-point scale andhas been rounded to one digit after the decimal.1
StudentGPAACT12.82323.42433.22643.72753.62963.02672.72583.73093.830103.528113.931Estimate the relationship between GPA and ACT by applying OLS to thedata in the table. That is, obtain the OLS slope and intercept coefficientsfor the equation:dGPA=ˆβ0+ˆβ1ACT.a.Report the slope estimate to two decimal places (and likewise for theother answers on Q1).b. By how much is GPA predicted to change if ACT increases by 4 points?Report your answer.c. Report the intercept estimate.d. Does the intercept have a useful interpretation here?
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cautious when making predictions far outside the range of our data.

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