a$)(5$ points$)$ Consider the following estimated regression equation $($standard

errors in parentheses$)$:

$$y $=5\mathrm{.}83+0\mathrm{.}869$x R$2=0\mathrm{.}756$

$($se$)(1\mathrm{.}23)(0\mathrm{.}117)$

$3$

Rewrite the estimated equation $($with standard errors and R$2)$ that would

result if all values of x were divided by $10$ and all values of y were divided

by $20$ before estimation.

b$)(5$ points$)$ Consider the following model:

Yi $=$ $0+$ $1$Eduationi $+$ $2$Experiencei $+$ ui$.$

Suppose you leave out the years of experience variable. What kinds of prob$-$

lems or biases would you expect? Explain verbally $($in case there is a bias,

determine its sign$).$