Exam (elaborations)

Econometrics review

0 purchase

Course
Econ 306

Institution
Penn State

Model Specification: Importance of correctly specifying the functional form and dealing with omitted variable bias. Dummy Variables: Use of binary variables in regression models to capture qualitative effects

[Show more]

Preview 1 out of 4 pages

View example

Uploaded on September 22, 2024
Number of pages 4
Written in 2022/2023
Type Exam (elaborations)
Contains Questions & answers

$6.49

Add to cart

Add to wishlist

100% satisfaction guarantee
Immediately available after payment
Both online and in PDF
No strings attached

ECON306, Fall 2022
Solutions: Study Material for Midterm #2

1 Multiple Choice
circle the letter of the best answer.
A) You want to estimate the size of a car’s engine’s displacement (basically, how large is the engine).
The weight of a car has a causal effect on the size of an engine’s displacement (heavier cars need
larger engines). The length of a car does not have a causal effect on the size of a car’s engine.
There is a strong, positive correlation beteween weight and length. Which of the following
specifications is subject to omitted variable bias?
a) displacement = β0 + β1 weight + β2 length + ui
b) displacement = β0 + β1 weight + ui
c) displacement = β0 + β1 length + ui X
d) displacement = β1 weight + β2 length + ui
B) The interpretation of the slope coefficient in the model ln(Yi ) = β0 + β1Xi + ui is as follows:
a) an increase in X by one unit is associated with a β1 change in Y
b) an increase in X by one unit is associated with a 0.01β1 % change in Y.
c) an increase in X by one unit is associated with a β1 % change in Y.
d) an increase in X by one unit is associated with a 100β1 % change in Y. X
C) You would run into a problem with perfect multicollinearity if your regressors include
a) degress Fahrenheit and degrees Celsius X
b) dummy variables for every size drink but not intercept
c) students’ cumulative GPA and semester GPA
d) the value of the S&P 500 index and the value of the Dow Jones Industrial Average
D) If you intended to measure the speed of cars [in miles per hour(mph))] on a given stretch of road
with a radar gun, but then found out after your measurements were all taken that the radar gun
was set to km/h, how could you correct your results? Note: there are 1.609km in one mile.
1.6092 σspeed
2
a) Run the regression then multiply the relevant slope term by 2
1.6092 σspeed +1.6092
1.6092 σspeed
2
b) Run the regression then divide the relevant slope term by 2
1.609 σspeed +1.6092
2

c) Convert speed into mph then put that newly converted variable into the regression X
d) Go back in time and re-measure cars’ speed with the radar gun in the proper setting.
E) Which type of measurement error would not cause biased coefficients in a regression?
a) classical measurement error in X
b) classical measurement error in Y X
c) systematic measurement error in X
d) systematic measurement error in Y

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller lexustherealone. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $6.49. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

67479 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 15 years now

Start selling