Deck 27: an Introduction to Econometrics

Question 1

"Ordinary least squares" is a technique that can be used to

A)identify the best model.
B)determine which variables in a model are endogenous and which are exogenous.
C)obtain a bar graph showing successive quarterly increases in output.
D)obtain a line describing consumption behavior in the real world.
E)determine the direction of causation between consumption and income.

Answer 1

D

Question 2

When we use ordinary least squares to determine the relationship between changes in consumption and changes in both current and lagged income,we find that

A)only current income influences current consumption.
B)current income has no impact on current consumption.
C)consumption is not affected by income in any quarter.
D)current income,last quarter's income,and income two quarter's ago all have the same impact on current consumption.
E)current income has a greater impact on consumption than income lagged one quarter.

Answer 2

E

Question 3

A key step in using instrument variable methods is to

A)find one or more exogenous variables that influence your dependent variable.
B)decrease the number of lags in the regression equation.
C)conduct interviews to determine how accurate your data really is.
D)run the regression on two different computers to see if the results differ.
E)eliminate the dependent variable.

Answer 3

A

Question 4

Which of the following problems would lead an economist to use instrument variable methods?

A)the dependent variable has an impact on the independent variable.
B)there are too few quarters of data.
C)there are too many independent variables.
D)the R2 is too high.
E)the residuals are too small.

Question 5

A large "T-statistic" tell us that

A)a tiny change in the independent variable will cause a relatively large change in the dependent variable.
B)we do not have enough data to obtain an accurate regression line.
C)we can be confident that our estimated coefficient is not zero.
D)we should have included more "lags" in our model.
E)we have incorrectly switched the dependent and independent variables in our model.

Question 6

When we estimate a regression to determine the relationship between changes in consumption and changes in current income,we find that

A)there are no residuals.
B)the R2 is zero.
C)the MPC is larger than one.
D)all of the above
E)none of the above

Question 7

When estimating a regression line,a high R2‚ tells us we have

A)a good fit.
B)large residuals.
C)correctly determined the direction of causation.
D)all of the above
E)none of the above