ECON310 QUIZ 1

2020-2021 Spring Semester

1. Which of the following is NOT an assumption of the Simple Linear Regression Model?
a.) The value of y, for each value of x, is
y = 1 + 2x + e
b.)The variance of the random error e is
var(e)= 2
c.) The covariance between any pair of random errors ei and ej is zero
d.) The parameter estimate of 1 is unbiased.

Ans: d (Ch2 Q3)

2. In an econometric model that aims to analyze the relationship between income and monthly
expenditures on entertainment, which variable is the dependent variable based on economic
knowledge?
a.) income
b.) monthly expenditures on entertainment
c.) income elasticity
d.) demand for entertainment

Ans: b (Ch2 tb Q1)

3. The OLS estimators for 1 and 2 are formulas derived by minimizing _____________.
a.) the sum of the error terms or residuals
b.) the sum of the squared residuals
c.) the slope of the regression line
d.) the fit of the regression line to the observed data.

Ans: b (Ch2 tb Q4)

4. If b1 is an estimator for 1 such that E(b1) = 1 , then it must be the case that
a.) b1 is an efficient estimator
b.) b1 is an unbiased estimator
c.) b1 is a linear estimator
d.) b1 is a preferred estimator

Ans: b (Ch2 tb Q7)

5. Under the Gauss-Markov Theorem when assumptions of the Classical Linear Regression Model
(CLRM) are met, what estimators of 1 and 2 may have smaller variances than b1 and b2?
a.) none
b.) a non-linear estimator
c.) a normally distributed estimator
d.) an estimator derived from economic theory

Ans: b (Ch2 tb Q8)

6. You have estimated the following equation using OLS:

Y^ = - 33.75 + 0.45 X

where Y is annual saving in and X is annual income both measured in thousands of dollars for a
sample of households. According to this estimated model, slope coefficient shows that

a.) average increase in saving is 0.45 dollars when income increases by one dollar
b.) marginal propensity to save is 0.45
c.) when income is zero, saving is negative
d.) both A and B are correct

Ans: d

7. You have the results of a simple linear regression model specified as y = 1 + 2x + u based on
cross-sectional data with N = 51 observations. For this regression equation the estimated error
variance is calculated as 2.04672. Given this information, the residual sum of squares equals
a.) 104.38
b.) 100.29
c.) 106.43
d.) cannot be determined from above information

Ans: b (Ch2 Q2.7-a book Hill)

8. You have the results of a simple linear regression model specified as y = 1 + 2x + u based on
cross-sectional data with N = 51 observations. If he estimated var( b 2 ¿= 0.00098, then the standard
error of b 2 is
a.) 0.03541
b.) 0.04330
c.) 0.03130
d.) 0.02342

Ans: c (Ch2 Q2.7-b book Hill)

9. You have the results of a simple linear regression model specified as y = 1 + 2x + u based on
cross-sectional data with N = 51 observations. If b 2= 0.18, X = 69.139 and Y = 15.187, what is the
estimate of the intercept parameter?
a.) 2.7420
b.) 1.8043
c.) 3.4342
d.) 1.3325

Ans: a (Ch2 Q2.7-d book Hill)

10. Which of the following is not a component of a hypothesis test?
a.) null hypothesis
b.) goodness-of-fit
c.) test statistic
d.) rejection region

Ans: b (Ch3 tb Q6)

11. You estimate a simple linear regression model using a sample of 25 observations and
obtain the following results (estimated standard errors in parentheses below coefficient
estimates):
Y = 97.25 + 33.74 X
(3.86) (9.42)
You want to test whether the slope parameter is statistically significantly different from
zero or not. The null and alternative hypothesis are

a.) null hypothesis: slope parameter equals zero, alternative hypothesis: slope parameter
is greater than zero
b.) null hypothesis: slope parameter equals zero, alternative hypothesis: slope parameter
is less than zero
c.) null hypothesis: slope parameter equals zero, alternative hypothesis: slope parameter
is not equal to zero
d.) null hypothesis: slope parameter greater than zero, alternative hypothesis: slope
parameter is equal to zero

Ans: c (Ch3 tb Q3)

12. You estimate a simple linear regression model using a sample of 25 observations and
obtain the following results (estimated standard errors in parentheses below coefficient
estimates):
Y = 97.25 + 33.74 X
(3.86) (9.42)
You want to test whether the slope parameter is statistically significantly different from
zero or not. For the estimated slope coefficient, the calculated t-statistics is
a.) 25.1943
b.) 13.5817
c.) 3.5817
d.) 15.1943

Ans: c (Ch3 tb created from Q3)

13. You estimate a simple linear regression model using a sample of 25 observations and
obtain the following results (estimated standard errors in parentheses below coefficient
estimates):
Y = 97.25 + 33.74 X
(3.86) (9.42)
You want to test whether the slope parameter is statistically significantly different from
zero or not. If you choose 5% significance level, what is the critical t- value?

a.) 2.069
b.) 1.714
c.) 2.060
d.) 1.708

Ans: a (Ch3 tb)

14. You estimate a simple linear regression model using a sample of 25 observations and
obtain the following results (estimated standard errors in parentheses below coefficient
estimates):
Y = 97.25 + 33.74 X
(3.86) (9.42)
You want to test the following hypothesis: H0: beta2 = 12, H1: beta2 ≠12. If you choose to
reject the null hypothesis based on these results, what is the probability you have
committed a Type I error?
a.) between .05 and .10
b.) between .01 and .025
c.) between .02 and .05
d.) It is impossible to determine without knowing the true value of beta 2

Ans: c

15.) In testing H0: beta2 = 2 using a .05 probability of a Type I error, you find a p-value of
0.38. What should you conclude?
a.) H0 is true, beta2 = 2.
b.) H0 should be rejected and is unlikely to be true since the p-value < .50.
c.) It is impossible to know for sure, but there is a 0.38 probability that beta 2 = c.
d.) There is not sufficient evidence to reject H0, so we accept the hypothesis by default.

Ans: d

16. When should a left-tailed significance test be used?

a.) When economic theory suggests the coefficient should be positive
b.) When it allows you to reject the null hypothesis at a lower p-value
c.) When economic theory suggests the coefficient should be negative
d.) When you know the true value of beta2 is positive.

Ans: c (CH3 tb Q.19)

17. You estimate a simple linear regression model using a sample of 25 observations and
obtain the following results (estimated standard errors in parentheses below coefficient
estimates):
Y = 97.25 + 19.74X R2 = 0.74
(3.86) (3.42)

The coefficient of determination shows

a) There is 74% variation in the explanatory variable.
b) Correlation coefficient between X and Y variables is 74%
c) About 74% of variation in Y variable can be explained by variations in X variable
d) The model has low predictive power.
Ans: d