1. The standard errors of the OLS coefficient estimates are incorrect and invalid when there is heteroscedasticity. **True or False**

2.**True or False**

**A** researcher is investigating whether government expenditure tends to crowd out investment and fits the following regression (standard errors in parentheses) using data from 30 countries:

I = 18.10 - 1.07G + 0.36Y R2 = 0.99

(7.79) (0.14) (0.02)

The researcher saves the residuals from this regression and regresses the squared residuals on G,Y, G2, Y2, and G*Y. The R2 = 0.9878 from this second regression. Test for the existence of heteroscedasticity at alpha=5%. True or False. There is heteroscedasticity.

**TrueFalse **

**3.**

**3**

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