Chapter 5: Regression with a Single Regressor: Hypothesis Tests and Confidence

Intervals
Multiple Choice for the Web

1)

The t-statistic is calculated by dividing

a. the OLS estimator by its standard error.
b. the slope by the standard deviation of the explanatory variable.
c. the estimator minus its hypothesized value by the standard error of the
estimator.
d. the slope by 1.96.

2)

Imagine that you were told that the t-statistic for the slope coefficient of the
698.9 2.28 STR was 4.38. What are the units of
regression line TestScore
measurement for the t-statistic?
a.
b.
c.
d.

3)

The 95% confidence interval for 1 is the interval

c.

( 1 1.96SE ( 1 ), 1 1.96SE ( 1 ))
1.645SE (
),
1.645SE (
))
(
1
1
1
1

( 1.96SE ( ), 1.96SE ( ))

d.

1.96,
1.96)
(
1
1

a.
b.

4)

points of the test score.

number of students per teacher.
TestScore
STR
standard deviations

A binary variable is often called a

a.
b.
c.
d.

dummy variable
dependent variable
residual
power of a test

5)

If the errors are heteroskedastic, then

a.
b.

OLS is BLUE
WLS is BLUE if the conditional variance of the errors is known up to a
constant factor of proportionality
LAD is BLUE if the conditional variance of the errors is known up to a
constant factor of proportionality
OLS is efficient

c.
d.

6)

Using the textbook example of 420 California school districts and the regression
of test scores on the student-teacher ratio, you find that the standard error on the
slope coefficient is 0.51 when using the heteroskedasticity robust formula, while
it is 0.48 when employing the homoskedasticity only formula. When calculating
the t-statistic, the recommended procedure is to
a.
b.
c.
d.

7)

use the homoskedasticity only formula because the t-statistic becomes

larger
first test for homoskedasticity of the errors and then make a decision
use the heteroskedasticity robust formula
make a decision depending on how much different the estimate of the
slope is under the two procedures

Consider the estimated equation from your textbook

= 698.9 - 2.28 STR, R2 = 0.051, SER = 18.6
TestScore
(10.4) (0.52)
The t-statistic for the slope is approximately
a.
b.
c.
d.

8)

4.38
67.20
0.52
1.76

You have collected data for the 50 U.S. states and estimated the following
relationship between the change in the unemployment rate from the previous year

(
ur ) and the growth rate of the respective state real GDP (gy). The results are as
follows

ur = 2.81 0.23 gy, R2= 0.36, SER = 0.78

(0.12) (0.04)

Assuming that the estimator has a normal distribution, the 95% confidence
interval for the slope is approximately the interval
a.
b.
c.
d.

9)

[2.57, 3.05]
[-0.31,0.15]
[-0.31, -0.15]
[-0.33, -0.13]

Using 143 observations, assume that you had estimated a simple regression
function and that your estimate for the slope was 0.04, with a standard error of
0.01. You want to test whether or not the estimate is statistically significant.
Which of the following decisions is the only correct one:
a. you decide that the coefficient is small and hence most likely is zero in the
population
b. the slope is statistically significant since it is four standard errors away
from zero
c. the response of Y given a change in X must be economically important
since it is statistically significant
d. since the slope is very small, so must be the regression R2.

10)

You extract approximately 5,000 observations from the Current Population

Survey (CPS) and estimate the following regression function:

AHE = 3.32 0.45 Age, R2= 0.02, SER = 8.66

(1.00) (0.04)
where AHE is average hourly earnings, and Age is the individuals age. Given the
specification, your 95% confidence interval for the effect of changing age by 5
years is approximately
a.
b.
c.
d.

[$1.96, $2.54]
[$2.32, $4.32]
[$1.35, $5.30]
cannot be determined given the information provided