Question 1

A dummy variable trap arises when a single dummy variable describes a given number of groups.

Accepted Answer

A dummy variable trap occurs when two or more dummy variables are highly correlated, meaning they provide redundant information, typically happening when one uses a dummy variable for each category of a categorical variable without omitting one category as the reference group.

Question 2

The multiple linear regression model with a binary dependent variable is called the linear probability model.

Accepted Answer

This is true. The linear probability model is a type of regression model where the dependent variable is binary (taking values of either 0 or 1), and the independent variables are continuous. It is a type of multiple linear regression because it has more than one independent variable.

Question 3

Which of the following is true of Chow test?
A)It is a type of t test.
B)It is a type of sign test.
C)It is only valid under homoskedasticty.
D)It is only valid under heteroskedasticity.

Accepted Answer

C

Question 4

In the following regression equation,y is a binary variable: y= β₀+β₁x₁+…β_kx_k+ u In this case,the estimated slope coefficient, measures _____. A)the predicted change in the value of y when x₁ increases by one unit,everything else remaining constant B)the predicted change in the value of y when x₁ decreases by one unit,everything else remaining constant C)the predicted change in the probability of success when x₁ decreases by one unit,everything else remaining constant D)the predicted change in the probability of success when x₁ increases by one unit,everything else remaining constant

Accepted Answer

The answer of In the following regression equation,y is a...

Question 5

A problem that often arises in policy and program evaluation is that individuals (or firms or cities)choose whether or not to participate in certain behaviors or programs.

Accepted Answer

This is true. It is known as self-selection bias and can affect the accuracy of evaluations as the characteristics of those who choose to participate may be different than those who do not.

Question 6

Which of the following Gauss-Markov assumptions is violated by the linear probability model?
A)The assumption of constant variance of the error term.
B)The assumption of zero conditional mean of the error term.
C)The assumption of no exact linear relationship among independent variables.
D)The assumption that none of the independent variables are constants.

Accepted Answer

The linear probability model violates the assumption of constant variance of the error term (homoscedasticity) because the variance of the error term changes with the values of the independent variables.

Question 7

Which of the following is true of dummy variables?
A)A dummy variable always takes a value less than 1.
B)A dummy variable always takes a value higher than 1.
C)A dummy variable takes a value of 0 or 1.
D)A dummy variable takes a value of 1 or 10.

Accepted Answer

A dummy variable takes a value of either 0 or 1, indicating the presence or absence of a categorical variable. It cannot take values less than 0 or higher than 1. Option A and B are incorrect because they state the opposite of what is true. Option D is incorrect because a dummy variable cannot take a value of 10, as it is not a binary variable.

Question 8

Refer to the model above.The benchmark group in this model is _____.
A)the group of educated people
B)the group of uneducated people
C)the group of individuals with a high income
D)the group of individuals with a low income

Accepted Answer

The benchmark group in a model is typically the reference group against which other groups are compared. In this context, it is likely the group of uneducated people, as they are often used as a baseline in studies comparing educational impacts.

Question 9

Refer to the above model.If ∂₀ > 0,_____. A)uneducated people have higher savings than those who are educated B)educated people have higher savings than those who are not educated C)individuals with lower income have higher savings D)individual with lower income have higher savings

Accepted Answer

If ∂₀ > 0, it means that an increase in education level (U1) leads to an increase in savings (S1) given a constant level of wealth (B0). Therefore, educated people (higher U1) have higher savings than those who are not educated.

Question 10

Refer to the model above.The inclusion of another binary variable in this model that takes a value of 1 if a person is uneducated,will give rise to the problem of _____.
A)omitted variable bias
B)self-selection
C)dummy variable trap
D)heteroskedastcity

Accepted Answer

Including a binary variable for being uneducated alongside an intercept term and another binary variable for being educated can lead to perfect multicollinearity, known as the dummy variable trap.

Question 11

Which of the following problems can arise in policy analysis and program evaluation using a multiple linear regression model?
A)There exists homoscedasticity in the model.
B)The model can produce predicted probabilities that are less than zero and greater than one.
C)The model leads to the omitted variable bias as only two independent factors can be included in the model.
D)The model leads to an overestimation of the effect of independent variables on the dependent variable.

Accepted Answer

Multiple linear regression can produce predicted probabilities outside the 0-1 range when used for binary outcomes, which is inappropriate.

Question 12

A _____ variable is used to incorporate qualitative information in a regression model.
A)dependent
B)continuous
C)binomial
D)dummy

Accepted Answer

Dummy variables are used to incorporate qualitative information in a regression model. A dummy variable is a binary variable that takes on the value 1 if a certain category is present and 0 otherwise. This allows us to include qualitative information in a regression model that only takes continuous variables as input. The other options listed - dependent, continuous, and binomial - describe different types of variables, but do not provide a way to incorporate qualitative information.

Question 13

The quarterly increase in an employee's salary depends on the rating of his work by his employer and several other factors as shown in the model below: Increase in salary= β₀+∂₀Rating + other factors.The variable 'Rating' is a(n)_____ variable. A)dependent variable B)ordinal variable C)continuous variable D)Poisson variable

Accepted Answer

The variable 'Rating' is an ordinal variable, as it represents the rating given to an employee's work which can be ordered or ranked into categories (e.g. excellent, good, average, below average, poor). It is not a dependent variable as it does not directly depend on any other variable in the model, and it is not a continuous variable as it does not have a range of possible numerical values. It is also not a Poisson variable as it does not represent counts of occurrences of a specific event.

Question 14

In a regression model,which of the following will be described using a binary variable?
A)Whether it rained on a particular day or it did not
B)The volume of rainfall during a year
C)The percentage of humidity in air on a particular day
D)The concentration of dust particles in air

Accepted Answer

A binary variable is a variable that can take only two values, typically 0 and 1. In this case, whether it rained on a particular day or not can only have two values, making it a binary variable. The other options listed are continuous variables and cannot be described using a binary variable.

Question 15

Which of the following is true of dependent variables?
A)A dependent variable can only have a numerical value.
B)A dependent variable cannot have more than 2 values.
C)A dependent variable can be binary.
D)A dependent variable cannot have a qualitative meaning.

Accepted Answer

A dependent variable can have different types of data, including binary data. Therefore, option C is correct. The other options are false statements.

Question 16

A binary variable is a variable whose value changes with a change in the number of observations.

Accepted Answer

A binary variable is a variable whose value can only be one of two possible values, typically represented as 0 or 1. It does not change with a change in the number of observations.

Question 17

Consider the following regression equation: y = β₀+β₁x₁+…β_kx_k+ u In which of the following cases,the dependent variable is binary? A)y indicates the gross domestic product of a country B)y indicates whether an adult is a college dropout C)y indicates household consumption expenditure D)y indicates the number of children in a family

Accepted Answer

In option B, the dependent variable "y" indicates whether an adult is a college dropout, which is a binary variable as it can only take two values - either the person is a college dropout or not. The other options have continuous dependent variables.

Question 18

The dummy variable coefficient for a particular group represents the estimated difference in intercepts between that group and the base group.

Accepted Answer

This is true, as the dummy variable coefficient represents the change in the intercept when the value of the dummy variable changes from 0 (base group) to 1 (particular group).

Question 19

Consider the following regression equation: y = β₀+β₁x₁+…β_kx_k+ u In which of the following cases,is 'y' a discrete variable? A)y indicates the gross domestic product of a country B)y indicates the total volume of rainfall during a year C)y indicates household consumption expenditure D)y indicates the number of children in a family

Accepted Answer

In option D, y is indicating the number of children in a family which is a discrete variable as it takes integer values only. On the other hand, options A, B, and C are continuous variables as they can take any value within a range.

Question 20

The income of an individual in Budopia depends on his ethnicity and several other factors which can be measured quantitatively.If there are 5 ethnic groups in Budopia,how many dummy variables should be included in the regression equation for income determination in Budopia?
A)1
B)5
C)6
D)4

Accepted Answer

In regression analysis, when dealing with categorical variables such as ethnicity, one less than the number of categories is used as dummy variables to avoid the dummy variable trap (perfect multicollinearity). Therefore, for 5 ethnic groups, 4 dummy variables are needed.

Quiz 7: Multiple Regression Analysis With Qualitative Information: Binary or Dummy Variables

A dummy variable trap arises when a single dummy variable describes a given number of groups.

The multiple linear regression model with a binary dependent variable is called the linear probability model.

Which of the following is true of Chow test?

In the following regression equation,y is a binary variable: y= β₀+β₁x₁+…β_kx_k+ u In this case,the estimated slope coefficient, measures _____.

A problem that often arises in policy and program evaluation is that individuals (or firms or cities)choose whether or not to participate in certain behaviors or programs.

Which of the following Gauss-Markov assumptions is violated by the linear probability model?

Which of the following is true of dummy variables?

Refer to the model above.The benchmark group in this model is _____.

Refer to the above model.If ∂₀ > 0,_____.

Refer to the model above.The inclusion of another binary variable in this model that takes a value of 1 if a person is uneducated,will give rise to the problem of _____.

Which of the following problems can arise in policy analysis and program evaluation using a multiple linear regression model?

A _____ variable is used to incorporate qualitative information in a regression model.

The quarterly increase in an employee's salary depends on the rating of his work by his employer and several other factors as shown in the model below: Increase in salary= β₀+∂₀Rating + other factors.The variable 'Rating' is a(n) _____ variable.

In a regression model,which of the following will be described using a binary variable?

Which of the following is true of dependent variables?

A binary variable is a variable whose value changes with a change in the number of observations.

Consider the following regression equation: y = β₀+β₁x₁+…β_kx_k+ u In which of the following cases,the dependent variable is binary?

The dummy variable coefficient for a particular group represents the estimated difference in intercepts between that group and the base group.

Consider the following regression equation: y = β₀+β₁x₁+…β_kx_k+ u In which of the following cases,is 'y' a discrete variable?

The income of an individual in Budopia depends on his ethnicity and several other factors which can be measured quantitatively.If there are 5 ethnic groups in Budopia,how many dummy variables should be included in the regression equation for income determination in Budopia?

Quiz 7: Multiple Regression Analysis With Qualitative Information: Binary or Dummy Variables

A dummy variable trap arises when a single dummy variable describes a given number of groups.

The multiple linear regression model with a binary dependent variable is called the linear probability model.

Which of the following is true of Chow test?

In the following regression equation,y is a binary variable: y= β0+β1x1+…βkxk+ u In this case,the estimated slope coefficient, measures _____.

A problem that often arises in policy and program evaluation is that individuals (or firms or cities)choose whether or not to participate in certain behaviors or programs.

Which of the following Gauss-Markov assumptions is violated by the linear probability model?

Which of the following is true of dummy variables?

Refer to the model above.The benchmark group in this model is _____.

Refer to the above model.If ∂0 > 0,_____.

Refer to the model above.The inclusion of another binary variable in this model that takes a value of 1 if a person is uneducated,will give rise to the problem of _____.

Which of the following problems can arise in policy analysis and program evaluation using a multiple linear regression model?

A _____ variable is used to incorporate qualitative information in a regression model.

The quarterly increase in an employee's salary depends on the rating of his work by his employer and several other factors as shown in the model below: Increase in salary= β0+∂0Rating + other factors.The variable 'Rating' is a(n) _____ variable.

In a regression model,which of the following will be described using a binary variable?

Which of the following is true of dependent variables?

A binary variable is a variable whose value changes with a change in the number of observations.

Consider the following regression equation: y = β0+β1x1+…βkxk+ u In which of the following cases,the dependent variable is binary?

The dummy variable coefficient for a particular group represents the estimated difference in intercepts between that group and the base group.

Consider the following regression equation: y = β0+β1x1+…βkxk+ u In which of the following cases,is 'y' a discrete variable?

The income of an individual in Budopia depends on his ethnicity and several other factors which can be measured quantitatively.If there are 5 ethnic groups in Budopia,how many dummy variables should be included in the regression equation for income determination in Budopia?

In the following regression equation,y is a binary variable: y= β₀+β₁x₁+…β_kx_k+ u In this case,the estimated slope coefficient, measures _____.

Refer to the above model.If ∂₀ > 0,_____.

The quarterly increase in an employee's salary depends on the rating of his work by his employer and several other factors as shown in the model below: Increase in salary= β₀+∂₀Rating + other factors.The variable 'Rating' is a(n) _____ variable.

Consider the following regression equation: y = β₀+β₁x₁+…β_kx_k+ u In which of the following cases,the dependent variable is binary?

Consider the following regression equation: y = β₀+β₁x₁+…β_kx_k+ u In which of the following cases,is 'y' a discrete variable?