EC3017 Applied EconometricsQuestions and sample answersThe exam consists of two parts: multiple choice questions and problems. There are 20 multiplechoice questions accounting for 60 marks (each question carries 3 points). Please answer ALLquestions in the multiple choice section. The exercises section accounts for 40 marks. In thissection you need to choose two exercises out of three. Each questi
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EC3017 Applied Econometrics
Questions and sample answers
The exam consists of two parts: multiple choice questions and problems. There are 20 multiple
choice questions accounting for 60 marks (each question carries 3 points). Please answer ALL
questions in the multiple choice section. The exercises section accounts for 40 marks. In this
section you need to choose two exercises out of three. Each question will account for 20 marks.
Multiple Choice Questions
1) The OLS residuals in the multiple regression model
a) cannot be calculated because there is more than one explanatory variable.
b) can be calculated by subtracting the fitted values from the actual values.
c) are zero because the predicted values are another name for forecasted values.
d) are typically the same as the population regression function errors.
2) If you wanted to test, using a 5% significance level, whether or not a specific slope coefficient
is equal to one, then you should
a) subtract 1 from the estimated coefficient, divide the difference by the standard error, and
check if the resulting ratio is larger than 1.96.
b) add and subtract 1.96 from the slope and check if that interval includes 1.
c) see if the slope coefficient is between 0.95 and 1.05.
d) check if the adjusted R2 is close to 1.
a
3) The interpretation of the slope coefficient in the model Yi = β0 + β1 ln(X i ) + ui is as follows:
a) a 1% change in X is associated with a β1 % change in Y.
b) a 1% change in X is associated with a change in Y of 0.01 β1 .
c) a change in X by one unit is associated with a 100 β1 % change in Y.
d) a change in X by one unit is associated with a β1 change in Y.
b
4) The notation for panel data is (Xit ,Yit ),i = 1,...,n and t = 1,...,T because
a) we take into account that the entities included in the panel change over time and are
replaced by others.
b) the X’s represent the observed effects and the Y the omitted fixed effects.
c) there are n entities and T time periods.
d) n has to be larger than T for the OLS estimator to exist.
5) cov (uit ,uis | Xit , Xis ) = 0 for t ≠ s means that
a) there is no perfect multicollinearity in the errors.
b) division of errors by regressors in different time periods is always zero.
c) there is no correlation over time in the residuals.
d) conditional on the regressors, the errors are uncorrelated over time.
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