ICT 1

Question 1

TRUE OR FALSE
Zero correlation between two variables does not imply that the variables are statistically independent

Answer 1

True

Question 2

TRUE OR FALSE
Omitted variable bias exists if the omitted variable is correlated with the included regressor and is a determinant of the dependent variable

Answer 2

True

Question 3

TRUE OR FALSE
Under imperfect multicollinearity the OLS estimator cannot be computed

Answer 3

False

Question 4

TRUE OR FALSE
The Ordinary Least Squares (OLS) will yield unbiased estimates when Cov(X, u) > 0, where X is an explanatory variable and u is the error term

Answer 4

False

Question 5

TRUE OR FALSE
In the multiple linear regression model, the adjusted R2 can decrease when an additional explanatory variable is added

Answer 5

True

Question 6

OLS stands for

Answer 6

Ordinary Least Squares

Question 7

TRUE OR FALSE
A scientist uses the survey data from the UK’s Office of National Statistics to study the effect of oil price on inflation. The data used in the study are experimental data

Answer 7

False

Question 8

TRUE OR FALSE
The random variables X and Y are said to be independent if the joint probability density function of (X, Y) is equal to the product of the marginal probability density functions of X and Y

Answer 8

True

Question 9

TRUE OR FALSE
In a cross-sectional data set, the data are collected form a sample of individuals at approximately the same point in time

Answer 9

True

Question 10

TRUE OR FALSE
One of the Classical assumptions required for Ordinary Least Squares (OLS) to yield unbiased estimates is that Cov(X, u) = 0 where X is an explanatory variable and u is the residual

Answer 10

True

Question 11

TRUE OR FALSE
In a simple linear model that satisfy Assumptions 1 to 5 TSS=ESS+RSSR

Answer 11

False

Question 12

TRUE OR FALSE
A natural measure of the association between two random variables is the covariance coefficient

Answer 12

True

Question 13

TRUE OR FALSE
If a change in variable x causes a change in variable y, variable y is called the dependent variable

Answer 13

True

Question 14

TRUE OR FALSE
One of the Classical assumptions required for Ordinary Least Squares (OLS) to yield meaningful estimates is that the Cov(X,u) =0, where X is an explanatory variable and u are the residuals

Answer 14

True

Question 15

TRUE OR FALSE
The coefficient of determination (R2) decreases when an additional independent variable is added to a multiple regression model

Answer 15

False

Question 16

TRUE OR FALSE
R^2 is the ratio of the explained variation compared to the total variation

Answer 16

True

Question 17

TRUE OR FALSE
The smaller the residual the close the estimated value of Y is to the actual (sample) value of Y

Answer 17

True
The residual is the difference between a data point and its estimate given the best fit line

Question 18

TRUE OR FALSE
Ct = a0 + a1Ct^2+ a2Yt + ut is an example of a dynamic consumption function (C is consumption and Y is income)

Answer 18

False
The term Ct2 implies that the current value of Ct is a function of current values squared and so this is not dynamic relationship. In fact this is a badly specified model

Question 19

TRUE OR FALSE
One of the Classical assumptions required for Ordinary Least Squares (OLS) to yield meaningful estimates is that Cov(X, u) = 0 where X is an explanatory variable and u is the residual

Answer 19

True
This is one of the classical assumptions

Question 20

TRUE OR FALSE
BLUE stands for best large unbiased estimator

Answer 20

False
Best linear unbiased estimator