Faculty of Economics and Political Sciences
Economics Department
Third Year
Econometrics I
T.A. Yasmine Amr
Sheet (1)
Simple Regression
Question 1: Choose the correct answer
̂1 + 𝛽
1. In the simple linear regression equation 𝑌̂ = 𝛽 ̂2 𝑋, the symbol 𝑌̂ represents the…
A. Average or predicted response
B. The difference between 𝑌𝑖 and the sample residual term
C. The estimator of the conditional mean of the dependent variable Y
D. All of the above
2. Regression analysis is used to…
A. Predict the correlation between two variables Y and X
B. Predict the value of a dependent variable Y on the basis of one or more explanatory
variables X
C. Compare between the effect of an explanatory variable X and the error term u.
D. None of the above
3. In the equation 𝑌𝑖 = 𝛽1 + 𝛽2 𝑋𝑖 + 𝑢𝑖 , the term (𝛽1 + 𝛽2 𝑋𝑖 ) represents the…
A. Estimated or predicted response
B. Estimated intercept
C. Estimated slope
D. Conditional mean of the dependent variable
4. Let Y represent weekly consumption expenditure and X is the weekly income; the
assumption of homoscedasticity is satisfied if….
A. The variability of consumption expenditure increases as income increases
B. Average consumption expenditure increases as income increases
C. The variability of consumption expenditure is the same for all income levels
D. Average consumption expenditure is the same for all income levels
5. An OLS estimator is unbiased if…
A. Its expected value is equal to the true value in the population
B. It is a linear function of the dependent variable Y in the regression model
C. Its value gets closer to the population parameter as the sample size increases
D. It has the minimum variance among all such linear unbiased estimators
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6. Which of the following represents a case of perfect multicollinearity?
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A. 𝑋2 = c + d; where c and d are constants
𝑋3
B. 𝑋2 = c 𝑋3 + d; where c and d are constants
C. 𝑋2 = c √𝑋3 + d; where c and d are constants
D. 𝑋2 = c 𝑋32 + d; where c and d are constants
Question 2: A regression between foot length (response variable in cm) and height
(explanatory variable in inches) for 33 students resulted in the following regression
equation:
ŷ=10.9+ 0.23X
1. One student in the sample was 73 inches tall with a foot length of 29 cm. What is the
predicted foot length for this student?
A. 17.57 cm
B. 27.69 cm
C. 29 cm
D. 33 cm
2. One student in the sample was 73 inches tall with a foot length of 29 cm. What is the
residual for this student?
A. 29 cm
B. 1.31 cm
C. 0.00 cm
D. -1.31 cm
3. What is the estimated average foot length for students who are 70 inches tall?
A. 27 cm
B. 28 cm
C. 29 cm
D. 30 cm
4. If the residual for a student who is 70 inches tall is 3, what is the foot length for that student?
A.45
B.30
C.29
D.35
Question 3: Data on the weekly family consumption expenditure (Y) and weekly Family
income (X) for 10 families living in upper Egypt is shown in Table 1.
A. Identify and estimate the regression equation.
B. Interpret the economic meaning of the estimated coefficients.
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Table 1
Y ($) X ($)
70 80
65 100
90 120
95 140
110 160
115 180
120 200
140 220
155 240
150 260
Question 4: The following scatterplot shows the relationship between the left and right forearm
lengths (cm) for a sample of 55 college students along with the regression line, where y =left
forearm length x = right forearm length.
One of the four choices is the equation for the regression line in the plot. The regression
equation is
A. y ̂= 1.22 + 0.95 x
B. ŷ = 1.22- 0.95 x
C. y = 1.22 + 0.95 x
D. x̂ = 1.22 0.95
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Question 5: State whether the following statements are True or False with justification.
1. The classical linear regression model assumes that the errors are independent, have a positive
mean and a decreasing variance.
2. The linearity assumption states that the parameters and the variables have to be linear.
3. If all the values of 𝑋𝑖 are equal, so the estimation of the parameters in the simple regression
model will be easier.
4. If the ten assumptions of the CLRM are satisfied, the least squares estimators have the lowest
variance among all linear unbiased estimators.
5. The OLS assumptions are related to the sample characteristics.
6. The classical linear regression model assumption 𝐸(𝑢𝑖 𝑢𝑗 ) = 𝜎 2 , where i=j, means that there
is no autocorrelation between the error terms.
7. A linear regression model can be estimated using 10 explanatory variables and a sample of 9
observations.
8. Using a linear specification when y scales as a function of the squares of x is a
misspecification of the regression model.
9. The 10 classical linear regression model assumptions must be satisfied to calculate the
regression estimates.
10. The assumption of no autocorrelation states that there is no correlation between the
explanatory variable and the error term.
