# Ch 2 Solutions to Slr

Good Essays
Solutions, Chapter 2/HL

ANSWERS TO CHAPTER 2 The Simple Regression Model

Econometrics Economics of Innovation and Growth

A = Problems B = Examples (from chapter 2) C = Cumputer Exercises

1

Solutions, Chapter 2/HL

A: Problems
2.1 Let kids denote the number of children born to a woman, and let educ denote years of education for the woman. A simple model relating fertility to years of education is kids = β 0 + β1educ + u where u is the unobserved error. (i) (ii) What kind of factors are contained in u? Are these likely to be correlated with level of education? Will a simple regression analysis uncover ceteris paribus effects of education on fertility? Explain.

(i) Income, age, and family background (such as number of siblings) are just a few possibilities. It seems that each of these could be correlated with years of education. (Income and education are probably positively correlated; age and education may be negatively correlated because women in more recent cohorts have, on average, more education; and number of siblings and education are probably negatively correlated.) (ii) Not if the factors we listed in part (i) are correlated with educ. Because we would like to hold these factors fixed, they are part of the error term. But if u is correlated with educ then E(u|educ) ≠ 0, and so SLR.3 fails. --------------------------------------------------------------------------------------------------------------2.2 In the simple linear regression model y=β0+β1x + u, suppose that E(u) ≠ 0. Letting α0=e(u), show that the model can always be rewritten with the same slope, but new intercept and error, where the new error has a zero expected value. Answers In the equation y = β0 + β1x + u, add and subtract α0 from the right hand side to get y = (α0 + β0) + β1x + (u − α0). Call the new error e = u − α0, so that E(e) = 0. The new intercept is α0 + β0, but the slope is still β1.

2

Solutions, Chapter 2/HL 2.3 The following table contains the ATC

## You May Also Find These Documents Helpful

• Good Essays

CHAPTER 2 Mechanics of Futures Markets Practice Questions Problem 2.8. The party with a short position in a futures contract sometimes has options as to the precise asset that will be delivered, where delivery will take place, when delivery will take place, and so on. Do these options increase or decrease the futures price? Explain your reasoning. These options make the contract less attractive to the party with the long position and more attractive to the party with the short position. They therefore…

• 3178 Words
• 13 Pages
Good Essays
• Powerful Essays

Chapter 2 1. A conceptual framework is a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function, and limits of financial accounting and financial statements. A conceptual framework is necessary in financial accounting for the following reasons: (1) It enables the FASB to issue more useful and consistent standards in the future. (2) New issues will be more quickly solvable by reference to an existing framework…

• 1542 Words
• 11 Pages
Powerful Essays
• Satisfactory Essays

Meaning of Slack Variables. Slack variables have an important physical interpretation and represent a valuable commodity, such as unused labor, machine time, money, space, and so forth. Teaching Suggestion 9.2: Initial Solutions to LP Problems. Explain that all initial solutions begin with X1 ϭ 0, X2 ϭ 0 (that is, the real variables set to zero), and the slacks are the variables with nonzero values. Variables with values of zero are called nonbasic and those with nonzero values are said to be…

• 6381 Words
• 26 Pages
Satisfactory Essays
• Good Essays

Property, Plant, and Equipment ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises 1, 2, 3, 4, 5, 13 Concepts Problems for Analysis 1. Valuation and classification of land, buildings, and equipment. 1, 2, 3, 4, 6, 7, 12, 13, 15, 21 2. Self-constructed assets, capitalization of overhead. 5, 8, 20, 21 4, 6, 12, 16 3. Capitalization of interest. 8, 9, 10, 11, 2, 3, 4 13, 21 4, 5, 7, 8, 9, 10, 16 1, 5, 6, 7 3 4. Exchanges of assets. 12, 16, 17 8, 9, 10, 11, 12 3…

• 17388 Words
• 152 Pages
Good Essays
• Satisfactory Essays

end in January through the end of May, are labeled as the prior calendar year. For example, a fiscal year ending January 31, 2010 would be labeled fiscal 2009 because the bulk of the operations occurred in calendar 2009 rather than in 2010. Q3-2. A journal entry records a transaction in a company’s “general journal.” A general journal is a book of original entry for the initial recording of any type of transaction or accounting adjustment. It contains space for dates and for accounts to…

• 7500 Words
• 30 Pages
Satisfactory Essays
• Powerful Essays

shape them so as to produce a favorable tax result. p. C:1-2. C:1-2 According to the AICPA’s Statements on Standards for Tax Services, the tax practitioner owes the client the following duties: (1) to inform the client of (a) the potential adverse consequences of a tax return position, (b) how the client can avoid a penalty through disclosure, (c) errors in a previously filed tax return, and (d) corrective measures to be taken; (2) to inquire of the client (a) when the client must satisfy conditions…

• 7124 Words
• 29 Pages
Powerful Essays
• Better Essays

Allocation Solutions to Review Questions 1. Companies allocate costs to estimate or assess the costs of their activities (products, processes, etc.). It is an estimate and subject to the problem that cost allocation contains an arbitrary element. Not allocating costs, however, is also an estimate—an estimate of zero. This may be appropriate for some decisions, but not for others. Some of the disadvantages (costs) include: (1) Additional bookkeeping; (2) Additional management…

• 7520 Words
• 31 Pages
Better Essays
• Good Essays

Preliminary English Twelve Angry Men – Reginald Rose Terminology Accused: a person or group of people who are charged with or on trial for a crime. Plaintiff: a person who brings a case against another in a court of law. Beyond reasonable doubt: The standard that must be met by the prosecution's evidence in a criminal prosecution: that no other logical explanation can be derived from the facts except that the defendant committed the crime, thereby overcoming the presumption that a person…

• 637 Words
• 3 Pages
Good Essays
• Powerful Essays

16 Networking Types, Devices, and Cabling Reviewing the Basics 1. What type of network topology is used when five switches are used on a small LAN and each switch connects to multiple computers on the LAN? A star bus topology or a hybrid topology 2. Place the following networking technologies in the order of their highest speed, from slowest to fastest: WiMAX, dial-up networking, cable Internet, Fast Ethernet, 3G Dial-up networking, 3G, cable Internet, WiMAX, Fast Ethernet 3. What is the difference…

• 1258 Words
• 6 Pages
Powerful Essays
• Satisfactory Essays

CRR – SLR and Liquidity Management Lecture and Presentation By P. R. Kulkarni, Managing Director, Fluent Consultants Pvt. Ltd., Pune. P. R. Kulkarni, Managing Director, Fluent Consultants Pvt. Ltd., Pune 1 Regulatory powers of RBI RBI gets regulatory powers under Banking Regulation Act,1949 RBI has some powers under the Reserve Bank of India Act,1935 Contd. …. P. R. Kulkarni, Managing Director, Fluent Consultants Pvt. Ltd., Pune 2 Regulatory powers of RBI RBI…

• 2350 Words
• 10 Pages
Satisfactory Essays