In the model Y i = 1 + 2 D i + u i ,

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In the model Yi = β1 + β2Di + ui , let Di = 0 for the first 40 observations and Di = 1 for the remaining 60 observations.You are told that ui has zero mean and a variance of 100. What are the mean values and variances of the two sets of observations?

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Basic Econometrics

ISBN: 978-0073375779

5th edition

Authors: Damodar N. Gujrati, Dawn C. Porter

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