Dhaka School of Economics (DScE)

Master of Economics (Environmental Economics)

Semester: 02, Batch: 12, Session: 2022-23
Course: Statistical Methods and Econometrics (C-202)
Make-up test
Total Marks: 20 Time: 1 hour

1. The OLS estimation for a model that relates annual household expenditures in thousand
Euros (𝐺𝑖) with annual household disposable income in thousand Euros (𝐼𝑖) and number
of individuals within the household (𝑁𝑖) is given by the following regression line (𝑛 =
30 households):

𝐺̂𝑖 = 2.24 + 0.6𝐼𝑖 + 1.45𝑁𝑖

(2.666) (0.0345) (0.5253)

𝑅2 = 0.45
(a) Why do we need regression when we have correlation? Explain the differences
between them. 3
(b) Test the individual significance of each explanatory variable at 5% significance
level. 4
(c) Find the value of F and test the overall significance of the model at 5% significance
level. 3

2. Data on sales and advertising expenditure of 100 firms in January 2019 are given below:
Sales ($) Advertising expenditure ($)
Total 104175 7183.3
Variance 55245.3 270.88
Covariance 2793.4
(a) Estimate the relationship between Sales and Advertising expenditure; that is
calculate the estimated regression coefficients (intercept and slope coefficient) and
write down the regression line. 4
(b) Interpret the regression coefficients. 2
(c) Obtain the coefficient of determination and explain what it means. 2
(d) Find the predicted value of sales if a firm expends $50 in advertising. 2