1. Inflation is a fact, and therefore its influence should not be removed from the data.

Answer: False Difficulty: 2 Objective: 8

Terms to Learn: cost estimation
Inflation can distort data that are compared over time so purely inflationary effects should
be removed.

2. The coefficient of determination (r2) measures the percentage of variation in Y

explained by X (the independent variable).

Answer: True Difficulty: 1 Objective: A

Terms to Learn: coefficient of determination (r2), regression analysis

3. Generally a coefficient of determination (r2) that is less than 0.30 indicates a

goodness of fit.

Answer: False Difficulty: 2 Objective: A

Terms to Learn: coefficient of determination (r2), regression analysis Generally
a coefficient of determination (r2) that is 0.30 or higher indicates a goodness of
fit.

4. Multicollinearity is NOT a concern in simple regression.

Answer: True Difficulty: 2 Objective: A

Terms to Learn: simple regression, multicollinearity

5. Multicollinearity exists in multiple regression when two or more independent

variables are highly correlated with each other.

Answer: True Difficulty: 2 Objective: A

Terms to Learn: multiple regression, multicollinearity