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ECO 4412 - Econometrics Chapter Review Chapter 2 Purpose: Review some of the more important topics in this chapter.

Instructions: Write your answer to each question only in the spaces provided. Show your work for all answers. 1. An econometrics class has 80 students and the mean weight of the class is 145 lb. A random sample of four students is selected from the class, and their mean weight is calculated. a. Will the mean weight in this sample equal 145 lb.? Why or why not? b. Use this example to explain why the sample mean Y is a random variable. 2. Refer back to question #1. Suppose a 95% confidence interval (CI) is calculated from that one sample of four students. Explain what the concept of a 95% CI means.

3. What is statistical inference? 4. The probability distribution for the number of Toshiba laptops that a Best Buy store sells per week is given below.
x 10 20 30 40 f(x) .2 .3 .4 .1

What is the expected number of laptops sold per week? For comparison, what is the average number of laptops sold per week? Why the difference?

5.

Here is a table showing the probabilities for weather conditions and commuting times.

a. What is the probability of a long, clear commute? What kind of probability is this? b. What is the probability of a rainy commute? What kind of probability is this? c. What is the probability of a short commute if you know that it is raining? What kind of probability is this? 6. Suppose you standardize a specific value of the random variable X. That is, you calculate its z-score. a. What is the formula for standardizing a value? b. What does the z-score value tell you about the X value? 7. Suppose that you have the data set (Y1, Y2,, Yn), where Yi = value of Y for the ith individual sampled. a. What does it mean to say that two values Y1 and Y2 are independently distributed? b. What does it mean to say that two values Y1 and Y2 are identically distributed? c. What is the abbreviation for saying that Y1 and Y2 are independently and identically distributed? 8. What is the definition of the sampling distribution of Y ? 9. It is a fact that E (Y ) = Y where Y is the population mean of Y. a. Explain in simple terms and with reference to the sampling distribution of Y what that fact means. b. Does this fact mean that Y is a biased or unbiased estimator of Y ?

10. This question refers to the sampling distribution of Y when n is large. a. What does the Law of large Numbers say about the distribution of Y ? b. What does the Central Limit Theorem say is the distribution of Y ?