Use the following table to indicate the correctly ordered steps in conducting an empirical economic analysis to test an economic theory.

Steps

$1.$ Formulate the question of interest

$2.$ Construct a formal or informal economic model

$3.$ Specify an econometric model

$4.$ Estimate model parameters using econometric methods

$5.$

$6.$

In an empirical economic analysis, how does the econometric model relate to the economic model? Check all that apply.

The econometric model imposes a functional form on the more generally specified economic model.

The economic model imposes a functional form on the more generally specified econometric model.

The economic theory is used to choose the variables in the economic model but not the variables in the econometric model.

The econometric model attempts to account for the variables in the economic model that cannot be reasonably observed.

You and a friend are conducting an empirical analysis of the effect of having an Americanized name on an immigrant's wages in the United States. Your friend has proposed the following as an econometric model for your analysis:

wage$=$f$($educ$,$exper,train,USname$)$

where

wage

$=$ hourly wage

educ

$=$ years of formal education

exper

$=$ years of work experience

USname

$=$ degree of Americanization of the immigrant name, and

train

$=$ years of specific job training

True or False: Your friend has proposed a valid and complete econometric model.

True

False