Chapter 1

Question 1

What is causality/a causal effect?

Provide an example

Answer 1

An action is said to cause an outcome if the outcome is the direct result, or consequence, of that action = causality.

Touching a hot stove causes you to get burned

Question 2

A variable X has what kind of effect on Y, if,

holding all else equal, a change in X leads to a change in Y?

Answer 2

A causal effect

Question 3

______ means that a specific action leads to a specific, measurable outcome.

Answer 3

Causality

Question 4

What is the best way to measure causality?

Give an example

Answer 4

A Randomized Controlled Experiment

The causal effect of tomato yields after applying fertilizer

Question 5

What is a randomized controlled experiment?

Answer 5

An experiment containing a control group and a treatment group that receives a treatment/intervention that is randomly assigned on a large scale to estimate causality between two variables.

Question 6

What is a prediction?

Answer 6

Using information on some/one variable/s to make a statement about the values of another variable

Question 7

What is a forecast?

Answer 7

A prediction about the value of a variable in the future

Question 8

What are the 5 major types of data used in econometrics?

Answer 8

Experimental
Observational
Cross-Sectional
Time Series
Panel

Question 9

What is Experimental Data?

What are some of the limitations to experimental data to econometrics?

Answer 9

Data gathered from an experiment

Getting reliable data can be very time consuming and expensive

Question 10

What is observational data?

What are some of the limitations of observational data to estimating causal effects?

Answer 10

Data gathered from observing behavior outside an experiment

Real world levels of treatment/intervention is not assigned at random and can make it difficult to sort out treatments/interventions from other factors

Question 11

What is Cross-Sectional Data?

Give an example

Answer 11

Data on different entities (workers, consumers, firms, etc.) for a single time period

California’s 420 school districts average test scores for the 1999 school year

Question 12

What is Time Series Data?

Give an example

Answer 12

Data for a single entity (person, firm, country) collected at multiple time periods

GDP and the term spread growth of the US from 1960 to 2020

Question 13

What is the Term Spread?

Answer 13

The difference between long-term and short-term interest rates

Question 14

What are the benefits of Time Series Data?

Answer 14

-By tracking a single entity over time, time-series data can be used to study the evolution of variables over time and to forecast future values

Question 15

What are the benefits of Cross-Sectional Data?

Answer 15

With cross-sectional data, we can learn about relationships among variables by studying differences across different entities during a single time period

Question 16

What is Panel Data?

Give an example

What is another name for Panel Data?

Answer 16

Data for multiple entities in which each entity is observed at two or more time periods

Cigarette consumption and their prices

Longitudinal Data

Question 17

What are the benefits of Panel Data?

Answer 17

Can be used to learn about economic relationships from the experiences of many different entities in the data set and from the evolution over time of the variables for each entity