1) In a regression of sales on income and seasonal dummy variables for a quarterly time series, a negative sign of the quarter 3 dummy variable means A) sales for quarter three are below that of the base quarter. B) sales for quarter three are negative. C) sales for quarter three are below average. D) sales for quarter three are above average. E) None of the options are correct.

2)Adding a lagged value of the dependent variable to a regression model may A)increase serial correlation. B)induce heteroscedasticity. C) help model the speed of adjustment in the dependent variable. D) induce data nonlinearity. E) None of the options are correct.