In the regression model Y_i = β₀ + β₁X_i+ β₂D_i + β₃(X_i × D_i)+ u_i, where X is a continuous variable and D is a binary variable, β₃ A)indicates the slope of the regression when D=1. B)has a standard error that is not normally distributed even in large samples since D is not a normally distributed variable. C)indicates the difference in the slopes of the two regressions. D)has no meaning since (X_i × D_i)= 0 when D_i = 0.

Question

Quizplus · Accepted Answer

β13 represents the interaction effect between X and D, indicating how the slope of the relationship between Y and X changes when D changes from 0 to 1. This means it shows the difference in slopes between the two conditions (D=0 and D=1), not just the slope for D=1 or a meaningless term.

In the Regression Model Yi = β0 + β1Xi

In the Regression Model Y_i = β₀ + β₁X_i