Intermediate Econometrics

Problem Set 1 Part A – Due at the beginning of class Wednesday, March 8, 2023

Part I (6’). For each of the following questions, choose the one best answer. Briefly
explain your reasoning (2’ each).

1. If X and Z are two random variables, then E ( X − Z ) is

a. E ( X ) − E ( Z ) + 2 E ( XZ )

b. E ( X ) + E ( Z )

c. the same as E ( Z − X )

d. E ( X ) − E ( Z )

2. Any linear combination of normally distributed random variables (assume

they have a jointly normal distribution):

a. is also normally distributed

b. is t-distributed

c. is F-distributed

d. none of the above

3. What can be said about the estimated slope coefficient for a regression of Y
on X , versus the estimated slope coefficient for a regression of X on Y ?

a. the slopes are reciprocals

b. the slopes are not reciprocals

c. the slopes are the negative of each other

d. the slopes are identical

Part II (30’). The CNN/USA Today/Gallup poll conducted on September 3-5, 2004,
surveyed n=755 likely voters; 405 reported a preference for President George W.
Bush, and 350 reported a preference for Senator John Kerry. Let p denote the
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fraction of all likely voters who preferred Bush at the time of the survey, and p̂ be
the fraction of survey respondents who preferred Bush. (5’ each)

a. Show E ( pˆ ) = p , Var ( =
pˆ ) p (1 − p ) / n .

b. Use the survey results to estimate p , and estimate the standard deviation of
your estimator.

c. What is the p-value for the test H 0 : p = 0.5 against H1 : p ≠ 0.5 ?

d. Will you accept the null stated above at 5% significance level?

e. Construct a 95% confidence interval for the fraction of likely voters in the
population who favored Bush in early September 2004.

f. The CNN/USA Today/Gallup poll conducted another survey on October 1-3,

2004, surveyed 756 likely voters; 378 reported a preference for Bush, and 378
reported a preference for Kerry. Was there a statistically significant change in
voter’s opinions across the two dates? (at 5% significance level)