1. In an economic model that uses incometo predict monthly expenditures on
entertainment, what is the dependent variable?
a.) income
b.) monthly expenditures on entertainment
c.) income elasticity
d.) demand
for entertainment
2. In an economic model that uses income to
predict monthly expenditures on entertainment, what is the independent or
explanatory variable?
a.) income
b.) monthly expenditures on entertainment
c.) income elasticity
d.) demand
for entertainment
3. Which of the following is NOT an assumption
of the Simple Linear Regression Model?
a.) The value of y, for each value of x, is
y =b1 +b2x + e
b.)The
variance of the random error e is
var(e)=s2
c.) The
covariance between any pair of random errors ei and ej
is zero
d.) The parameter estimate ofb1is unbiased.
4. The OLS estimators forb1andb2
are formulas derived by
minimizing _____________.
a.) the sum
of the error terms or residuals
b.) the sum
of the squared residuals
c.) the slope of the regression line
d.) the fit of the regression line to the
observed data.
5. Applying the OLS model to our data give us
the following regression equation:
ŷ = 3.41 + 12.89
x.
What would the
forecast value be when the independent variable is 15.0?
a.) 196.76
b.) 16.30
c.) 244.50
d.) 32.19
6. In the OLS model, what happens to var(b1) as the sample size (N)
increases?
a.) it also increases
b.) it decreases
c.) it does not change
d.) cannot be determined without more information
