File:  Ch01, Chapter 1, An Introduction to Econometrics

Multiple Choice

1.  Which of the following is NOT generally included in the study of econometrics?
a.)  using economic data to estimate relationships
b.)  testing economic hypotheses
c.)  predicting economic outcomes
d.)  developing new economic relationships.

Ans:  d
Level:  Easy
Section:  1.1

2.Consider the following model:
		Qd = f(P, Ps, Pc, INC)  
where Qd is quantity demanded of a particular product per month, P is the price of the product, Ps is the price of substitutes, Pc is the price of complements, and INC is monthly income.
This equation represents
a.)  a non-linear model
b.)  an economic model
c.)  an econometric model
d.)  a challenge to the law of demand.

Ans:  d
Level:  Easy
Section:  1.2

3.  Economic theory provides a basis for which variables are relevant and should be included in an econometric model.  But econometrics provides tools to estimate ____________________ which tells us ________________________________.
a.)  a model, the functional form that should be used.
b.)  causality, why it happens that way
c.) a parameter, how much or to what degree things change.
d.)  variables, the probability of a specific outcome.

Ans:  c
Level:  Moderate
Section:  1.2

4.  Why is a random error term included in an econometric model?
a.)  because many economic models have not been well developed yet and need to allow for inaccuracies
b.)  because some people are irrational
c.)  because there is intrinsic uncertainty in any economic activity due to individual decision making
d.)  because most estimating techniques are not well suited to work with a deterministic model.

Ans:  c
Level:  Moderate
Section:  1.3

5.  Refer to the following equation:
Qs = b1 + b2P + b3Pr + b4Ps + b5TAX + e
where Qs is annual quantity supplied, P is the price of the product, Pr is the price of resources, Ps is the price of goods that are substitutes in production, and TAX is the excise tax on the product.  This equation is 
a.)  an economic model
b.)  an econometric model
c.)  a market model
d.)  a non-linear model

Ans:  b
Level:  Easy
Section:  1.3

6.  Refer to the following equation:
Qs = b1 + b2P + b3Pr + b4Ps + b5TAX + e
where Qs is annual quantity supplied, P is the price of the product, Pr is the price of resources, Ps is the price of goods that are substitutes in production, and TAX is the excise tax on the product. In this equation b1 represents
a.)  a parameter to be estimated
b.)  the random error term
c.)  the predicted quantity supplied
d.)  the equilibrium quantity

Ans:  a
Level:  Easy
Section:  1.3

7.  The parameters estimated using econometric methods are generally used for ___________________ or _____________________.
a.)  testing hypotheses, predicting
b.)  confirming, denying effects of policy.
c.)  validation, repudiation.
d.)  generating data, probability distributions.

Ans:  a
Level:  Moderate
Section:  1.3

8.  Suppose you stand outside a store and randomly give some shoppers coupons as they enter while other shoppers receive none.  You then record how much each shopper spends in the store.  The data you collect are
a.)  survey data
b.)  random data
c.)  experimental data
d.)  selective data

Ans:  c
Level:  Easy
Section:  1.4

9.  A data set that has observations on one entity at multiple points in time is classified as 
a).  time series data
b.)  cross-section data
c.)  panel data
d.)  flow data

Ans:  a
Level:  Easy
Section:  1.5

10:  A data set containing the number of adults with college degrees in each of the US states in 2009 is
a).  time series data.
b.)  cross-section data.
c.)  panel data.
d.)  flow data.

Ans:  b
Level:  Easy
Section:  1.5

11.  Which of the following variables is most likely to be quantitative?
a.)  gender
b.)  education
c.)  income
d.)  employment

Ans:  c
Level:  Moderate
Section:  1.5

12:  Which of the following variables is least likely to be quantitative?
a.)  age
b.)  GDP growth
c.)  marital status
d.)  inflation

Ans:  c
Level:  Moderate
Section:  1.5

13.  What does it mean for a panel data set to be balanced?
a.)  males and females are equally represented in the sample
b.)  the observations are equally split before and after the event being studied
c.)  the number of observations in the treatment and control group are equal
d.)  each unit of observation is observed for the same number of time periods

Ans:  d
Level:  Moderate/Difficult
Section:  1.5

14.  Of the following steps in conducting empirical economic research, which one should be performed last?
a.)  find appropriate data that can be used for estimation
b.)  build an economic model guided by economic theory
c.)  evaluate and analyze the consequences and implications of the results
d.)  estimate parameters and test hypotheses

Ans:  c
Level:  Moderate
Section:  1.6

15.  Which of the following sections usually comes first in a research report?
a.)  state of problem
b.)  description of data
c.)  review of literature on the topic
d.)  economic model

Ans:  a
Level:  Easy
Section:  1.7

16. What does NBER stand for?
a.)  Northern Banks Emergency Reserves
b.)  Normally Balanced Econometric Regression
c.)  National Bureau of Economic Research
d.)  National Business and Economic Regulators

Ans:  c
Level:  Easy
Section:  1.8

17.  Which regional Federal Reserve Bank provides access to large amounts of economic data through FRED?
a.)  Boston
b.)  New York
c.)  San Francisco
d.)  St. Louis

Ans:  d
Level:  Easy
Section:  1.8