Questions and Answers of Essentials Of Econometrics

Eighteen plots of land in Indiana were given different applications of nitrogen. In each case, the previous crop had been soybeans and all other factors were roughly comparable. Use the 18
Some child-development researchers tabulated the amount of crying by 38 babies when they were 4 to 7 days old, and then measured each baby’s IQ at 3 years of age [20]. Plot the data in Table 9.9 on
Table 9.11 shows annual U.S. beer production (X), in millions of barrels, and the number of married people (Y), in millions. Draw a scatter diagram and estimate the equation Y = α + βX + ε by
Estimate the parameters in the linear equation Y = α + βX + ε using the data in Table 9.12.Now plot these data and draw in your fitted line. Explain why you either do or do not think that the
Table 9.13 shows the percent neonatal mortality rate in the United States in 1980, for babies grouped by birth weight (grams).a. Estimate a linear regression model.b. Which variable is your dependent
To examine the relationship between the death penalty and murder rates, the following equation was estimated by least squares using U.S. cross-sectional data for 50 states:where Y = murder rate
A psychologist once suggested this possible relationship between the IQs of children and their parents [27]:What statistical phenomenon would explain this psychologist’s use of the coefficient 0.5,
When OPEC’s manipulation of oil supplies in the 1970s created an energy crisis, U.S. speed limits were reduced in an effort to reduce fuel consumption. Use the data in Table 10.7 to estimate this
Use the hard drive data for 2006 and 2007 in Table 1.6 to estimate the model Y = α + β1D + β2X + β3DX + ε, where Y = price, X = size, D = 0 in 2006, and D = 1 in 2007.a. Interpret your estimate
Use the data in Exercise 8.28 to estimate a multiple regression model with systolic blood pressure as the dependent variable and diastolic blood pressure the explanatory variable, allowing the slope
Consider this income-expenditure model:where Y is aggregate income and E is aggregate spending. Is this model monotonically stable, cyclically stable, monotonically unstable, or cyclically unstable?
Redo Exercise 11.44, this time assuming Et = 100 + 1.5Yt + 0.2Yt−1.Exercise 11.44Consider this income-expenditure model:where Y is aggregate income and E is aggregate spending. Is this model
Redo Exercise 11.44, this time assuming Et = 100 + 0.8Yt + 0.5Yt−1.Exercise 11.44Consider this income-expenditure model:where Y is aggregate income and E is aggregate spending. Is this model
Consider this dynamic income-expenditure model:where Y is national income, E is spending, and c is the tax rate on income (0 Y = E E = 100+ 1.2(1c) Y-1
The data in Exercise 9.39 were used to calculate the annual percentage change in real per capita disposable personal income, gt = 100(Yt − Yt−1)/Yt−1 (Table 11.4).a. Use least squares to
Consider this model of government fiscal policy:where G is government spending, H is taxes, Z is the government deficit, Y is national income, and t is time (t = 0 in the current year). All the
Consider this model in which national income Y depends on the previous period’s income and the current and previous period’s money supply M:where the parameters α, β1, β2, and β3 are
Which of these data are quantitative and which are qualitative?a. The number of years a professor has been teaching.b. The number of books a professor has written.c. Whether a professor has a Ph.D.d.
Which of these data are categorical and which are numerical?a. Whether a family owns or rents their home.b. A house’s square footage.c. The number of bedrooms in a house.d. Whether a house has
Which of these data are categorical and which are numerical?a. Whether a computer is made by Apple or by another company.b. The size of a computer monitor.c. The speed of a computer processor.d.
Which of these data are quantitative and which are qualitative?a. A country’s unemployment rate.b. A country’s population.c. A country’s gross domestic product (GDP).d. Whether a country
Identify the following data as cross-section, time series, or panel data:a. Unemployment rates in Germany, Japan, and the United States in 2010.b. Unemployment and inflation rates in Germany, Japan,
The Framingham Heart Study began in 1948 with 5,209 adult subjects, who have returned every two years for physical examinations and laboratory tests. The study now includes the children and
(continuation) Identify the following data as cross-section, time series, or panel data:a. Blood pressure of one woman every two years.b. The average HDL cholesterol level of the men in 1948, 1958,
Table 1.12 lists the reading comprehension scores for nine students at a small private school known for its academic excellence. Twenty students were admitted to the kindergarten class, and the nine
Table 1.13 shows index data on the overall CPI and three items included in the CPI.Explain why you either agree or disagree with these statements:a. Food cost more than housing in 2010.b. Housing
(continuation) Explain why you either agree or disagree with these statements:a. Apparel cost less than food in 2000.b. The cost of apparel went down between 2000 and 2010.c. The cost of food went up
(continuation) Calculate the percentage change in the cost of food, apparel, and housing between 2000 and 2010.
Table 1.14 shows data on four apparel price indexes that are used to compute the CPI.Explain why you either agree or disagree with these statements:a. Men’s apparel cost more than women’s apparel
Explain why you either agree or disagree with these statements:a. Men’s apparel is more expensive than women’s apparel, but boy’s apparel is less expensive than girl’s apparel.b. The cost of
Calculate the percentage change in the cost of each of these four types of apparel between 2000 and 2010.
Why does it make no sense to deflate a country’s population by its price level in order to obtain the “real population”?
It has been proposed that real wealth should be calculated by deflating a person’s wealth by hourly wages rather than prices. Suppose that wealth is $100,000, the price of a hamburger is $2, and
Table 1.15 shows the prices of three items in 2000 and 2010.a. Construct a price index that is equal to 100 in 2000. What is the value of your index in 2010? What is the percentage change in your
Answer the questions in Exercise 1.17, this time assuming that the quantities purchased are 12 loaves of bread, 6 pounds of meat, and 2 gallons of milk.Exercise 1.17Table 1.15 shows the prices of
The Dow Jones Industrial Average was 240.01 on October 1, 1928 (when the Dow expanded to 30 stocks), and 14,087.55 on October 1, 2007. The CPI was 51.3 in 1928 and 617.7 in 2007. Which had a larger
On January 11, 2008, the value of the Dow Jones Industrial Average was 12,606.30, and the divisor was 0.123017848. Explain why you either agree or disagree with these statements:a. The average price
Look up the values of the CPI in December 1969 and December 1989 and the Dow Jones Industrial Average on December 31, 1969, and December 31, 1989.Did consumer prices or stock prices increase more
Look up the values of the CPI in December 1989 and in December 2009 and the Dow Jones Industrial Average on December 31, 1989, and on December 31, 2009.Did consumer prices or stock prices increase
Two professors calculated real stock prices (adjusted for changes in the CPI) back to 1857 and concluded that [18] inflation-adjusted stock prices were approximately equal to nominal stock prices in
The authors of the study cited in the preceding exercise go on to consider what would have to happen for nominal stock prices to again equal real stock prices. What is the correct answer?
Use the data in Tables 1.9 and 1.10 to determine thea. 1970 wage in 2010 dollars.b. Percentage change in real wages between 1970 and 2010. Table 1.9: Consumer Price Index (CPI = 100 in 1967) 1970
Use the data in Tables 1.9 and 1.10 to determine thea. 1980 wage in 2000 dollars.b. Percentage change in real wages between 1980 and 2000. Table 1.9: Consumer Price Index (CPI = 100 in 1967) 1970
Table 1.16 shows the official U.S. poverty thresholds for families of four people. Use the CPI data in Table 1.9 to calculate the real poverty thresholds in 1960 dollars in each of the years shown.
Babe Ruth was paid $80,000 in 1931. When it was pointed out that this was morethan President Hoover made, he replied, “I had a better year than he did.” Using a base 100 in 1967, the CPI was 45.6
The first professional football player was W. W. Pudge Heffelfinger, a former All-American at Yale, who was working on a railroad in 1892 when he was paid $500 to play one game for the Allegheny
A researcher wants to see if U.S. News & World Report rankings influence the number of applications received by colleges and universities. He obtains the unadjusted data shown in Table 1.17 on
When a child loses a baby tooth, an old U.S. tradition is for the tooth to be put under the child’s pillow, so that the tooth fairy will leave money for it. A survey by a Northwestern University
The U.S. Social Security Administration estimated that someone 22 years old who earned $40,000 a year in 2008, works steadily for 45 years, and retires at age 67 in 2053, would begin receiving annual
The U.S. government reported that a total of 38.6 million pounds of toxic chemicals had been released into the air above New Jersey in 1982. A spokesman for the New Jersey Department of Environmental
The Dow Jones Industrial Average was 838.92 on December 31, 1970, and 11,577.51 on December 31, 2010. The Consumer Price Index was at 39.8 in December 1970 and 219.2 in December 2010 (using a base of
During the 1922–1923 German hyperinflation, people reported receiving more money for returning their empty beer bottles than they had originally paid to buy full bottles.Could they have made a
Between August 1945 and July 1946, the number of Hungarian pengos (the unit of Hungarian currency) in circulation increased by a factor of 12,000,000,000,000,000,000,000,000, while the price level
Critically evaluate this economic commentary:When it comes to measuring inflation, the average consumer can do a far better job than the economics experts…. Over the years I have been using a
Use the data in Table 1.11 to determine the 1971 cost in 2008 dollars of mailing a first-class letter. Is this value higher or lower than the actual $0.42 cost of mailing a letter in 2008? Date
Use the data in Table 1.11 to determine the 1991 cost in 2008 dollars of mailing a first-class letter. Is this value higher or lower than the actual $0.42 cost of mailing a letter in 2008? Date
Use the data in Table 1.11 to determine the percentage increase in the CPI between 2007 and 2008. Date Introduced First-Class Postage Rates ($) CPI (2008-100) 7/1/1885 11/3/1917 0.02 4.3 0.03 6.0
Use the data in Table 1.11 to determine the percentage increase in the CPI between 1978 and 1981. (Do not calculate the annual rate of increase, just the overall percentage increase.) Date Introduced
Table 1.11 shows the CPI with the index set equal to 100 in 2008. Suppose that we redo the CPI so that the index equals 100 in 1958; if so, what is the value of the CPI in 2008? What is the
Table 1.11 shows the CPI with the index set equal to 100 in 2008. Suppose that we redo the CPI so that the index equals 100 in 1985; if so, what is the value of the CPI in 2008? What is the
Instead of using the total population, we might deflate cigarette sales by the number of people over the age of 18, since a person must be at least 18 years old to buy cigarettes legally. There were
Mr. Bunker lives on beer and pretzels. In 2000, he bought 1,000 six-packs of beer for $2.00 per six-pack and 500 bags of pretzels for $1.00 per bag. In 2010, Bunker’s beer cost $3.00 per six-pack
Another way to calculate Bunker’s rate of inflation isWhat is Bunker’s rate of inflation using this approach? % increase in price of beer c) (" fraction of 2000 budget % increase in + price of
Ms. Vigor lives on carrot juice and tofu. In 2000, she bought 1,000 bottles of carrot juice for $2.00 per bottle and 400 pounds of tofu for $3.00 per pound. In 2010, Vigor’s carrot juice cost $2.50
Because of the large increase in the price of tofu, Ms. Vigor changed her diet to 1,200 bottles of carrot juice and 250 pounds of tofu in 2010. Calculate Vigor’s rate of inflation using C2000 =
Explain the error in this interpretation of inflation data:In the 12-month period ending in December of 1980, consumer prices rose by 12.4 percent—after a 13.3 percent increase the year before.
Answer this letter to Ann Landers: I’ve read your column for ages and almost always agree with you. One subject on which we do not see eye-to-eye, however, is senior citizens driving. According to
Identify the error in Table 3.10, showing consumer prices and the change in prices based on a price index equal to 100 in 2000.Table 3.10 Year Price Index Change from Previous Year Change from 2000
Redo the preceding exercise, this time using the mathematics scores.Preceding ExerciseUse the reading comprehension data in Exercise 6.18 to test the null hypothesis that the population mean of X is
Explain why you either agree or disagree with this interpretation of the results from estimating a regression model: “This study concludes that the data are statistically substantial because there
A study of 16,405 adult daughters of women who immigrated to California from other countries measured the economic status of the daughters by the median household income Y for the ZIP code they lived
The study described in the preceding exercise also looked at 11,794 first-born daughters at the time they gave birth to their first child. A least squares regression was used to examine the
Table 9.7 shows the SAT scores (600–2400) and college GPAs (four-point scale) for 24 second-year college students at a highly selective college. Use a simple regression model to estimate the
The Boston Snow (B.S.) indicator uses the presence or absence of snow in Boston on Christmas Eve to predict the stock market the following year: “the average gain following snow on the ground was
Explain the following observation, including the use of the word sadly: “There have always been a considerable number of pathetic people who busy themselves examining the last thousand numbers
Two psychologists found a strong positive correlation between family tension and the number of hours spent watching television [15]. Give a logical explanation other than television shows increase
Give a logical statistical explanation for the Cy Young jinx: Of 71 winners of the Cy Young Award [for the best pitcher] since it was instituted in 1956, only three followed with better years and 30
Sir Francis Galton planted seeds with seven different diameters (in hundredths of an inch) and computed the average diameter of 100 seeds of their offspring [17]:After deciding which is the dependent
Use the data in Exercise 9.9 to estimate the equation Parent = α1 + β1Offspring + ε1 and to estimate the equation Offspring = α2 + β2Parent + ε2 by ordinary least squares. Let b1 be your
Data were collected for 25 new cars on the cars’ weights (X) and estimated highway miles per gallon (Y). The model Y = α + βX + ε was estimated by least squares in three ways: the data were
A California college student wanted to see if there is a relationship between the weather and the color of clothes students wear. He collected data for 13 days in April on these two variables:X:
Suppose that you meet a 25-year-old man who is 6 feet, 2 inches tall and he tells you that he has two brothers, one 23 years old and the other 27 years old. If you had to guess whether he is the
A study used the data in Table 9.8 to investigate the effect of driving speed on traffic fatalities:where Y = deaths per million miles driven and X = average speed, miles per hour.a. The researcher
The model Y = α + βX + ε was estimated using annual data for 1991 through 2000. If X = 100 and Y = 100 in 1991 and X = 200 and Y = 200 in 2000, can the least squares estimate of β be negative?
A statistician recommended a strategy for betting on professional football games based on the logic of regression to the mean [18]. Do you think that he recommended betting for or against teams that
Professional baseball players who are batting 0.400 at the halfway point in the season almost always find that their batting average declines during the second half of the season. This slump has been
Howard Wainer, a statistician with the Educational Testing Service, recounted the following [19]: My phone rang just before Thanksgiving. On the other end was Leona Thurstone; she is involved in
Studies have found that people who have taken driver training courses tend to have more traffic accidents than people who have not taken such courses. How might you dispute the implication that
A petition urging students to take Latin classes noted that, “Latin students score 150 points higher on the verbal section of the SAT than their non-Latin peers.” How might a skeptic challenge
Table 9.10 shows data on the age (in months) at which 21 children said their first word and their score on a later test of mental aptitude [21]. Use a regression equation to see if there is a
A researcher wanted to investigate the theory that better baseball players tend to come from warmer climates, where they can play baseball 12 months of the year. He gathered data for 16 MLB teams on
A regression [22] of cricket chirps per minute (Y) for one cricket species on temperature in degrees Fahrenheit (X) gave this estimated equation: Y = −0.309 + 0.212X. Which is the dependent and
A researcher obtained the combined math and reading SAT scores (X) (scale 400–1600) and GPAs (Y) of 396 college students and reported these regression results:[ ]: t valuesa. There is an error in
A 1957 Sports Illustrated cover had a picture of the Oklahoma football team, which had not lost in 47 games, with the caption “Why Oklahoma Is Unbeatable.” The Saturday after this issue appeared,
A random sample of 30 second-semester college sophomores was asked to report their GPA (on a four-point scale) and the average number of hours per week spent on organized extracurricular activities,
What pattern do you see in Figure 9.14, a plot of the residuals from a least squares regression? Residuals 3 2 1 T -2 -3 1990 1995 2000 2005 2010 Figure 9.14
What pattern do you see in Figure 9.15, a plot of the residuals from a least squares regression? What do you think might have caused this pattern? Residuals 2 1 -2- -3- 0 10 20 30 40 50 60 70 80 90
Based on the Figure 9.16 plot of least squares residuals, what assumption about the regression model’s error term seems to be violated? 30 Residuals 20 20 10 10 0 -10 -20 -30 1990 1995 2000 2005
Based on the Figure 9.17 plot of least squares residuals, what assumption about the regression model’s error term seems to be violated? Residuals 25 20 15 10 S 0 -10 -15 -20 -25- 1990 1995 2000
What is puzzling about Figure 9.18, a plot of the residuals from a least squares regression? Residuals 2.0 1.5- 1.0- 0.5- 0.0- 00 -0.5 -1.0- -1.5- -2.0- 1980 1985 1990 1995 2000 2005 2010 Figure 9.18

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