1- Introduction

Question 1

What are the 3 basic steps for turning a conceptual model into an econometric model?

Answer 1

• Decide how to measure each variable
• Specify functional relationship f(·)
• Account for unobserved factors u

Question 2

What is the basic form of an econometric model?

Answer 2

y = f(x,u)

Question 3

What are the 5 steps of an empirical analysis?

Answer 3

• Pose a question
• Specify a conceptual model
• Translate the conceptual model into an econometric model
• Collect data
• Estimate the parameters

Question 4

What is the linear relationship form of the econometric model?

Answer 4

y = β0 + β1x +u

Question 5

What is u called and what does it represent?

Answer 5

It is called the error or disturbance term and it represents all the other factors that affect y

Question 6

What are the 4 main types of economic data?

Answer 6

• Cross sectional
• Time series
• Panel
• Pooled cross sectional

Question 7

Describe cross sectional data

Answer 7

Data collected on certain units at a given point in time

Question 8

Describe pooled cross sectional data

Answer 8

When two or more cross sections are combined in one data set

Question 9

Describe time series data

Answer 9

Consists of observations on variables observed over many time periods

Question 10

Describe panel data

Answer 10

The same units are followed over time

Question 11

What is correlation?

Answer 11

A linear association between 2 variables

Question 12

What would be the counterfactual to the question: How healthy would those who go to the gym be if they did not go to they gym?

Answer 12

Counterfactual would be: How healthy would those who do not go to the gym be if they
went?

Question 13

What are the 3 main steps in the process of a random experiment?

Answer 13

• In clinical trials, a randomly chosen treatment group gets a treatment
• A randomly chosen control group gets a placebo or no treatment
• The outcomes of Y of the control group are a counterfactual for the outcomes of the treatment group