ECO 391 Final Exam questions and
answers graded A+
Limitations of Correlation Analysis (3) - correct answer ✔✔Captures only a linear relationship
May not be reliable with outliers
Not necessarily casual
Deterministic Relationship - correct answer ✔✔If the value of the response variable is uniquely
determined by the values of the explanatory variables
Stochastic Relationship - correct answer ✔✔If the value of the response variable is inexact due
to the omission of relevant factors. Typically more common than deterministic.
Population regression line - correct answer ✔✔Yi = Bo + B1Xi + Ei
OLS - correct answer ✔✔Ordinary Least Squares - a statistical technique that uses sample data
to estimate the true population relationship between two (or more) variables.
Sample regression line - correct answer ✔✔y^ = Bo + B1Xi
What does each symbol mean in the regression model:
y = Bo + B1x + e - correct answer ✔✔y - dependent variable
x - explanatory variable
e - error term
Bo & B1 - unknown parameters to be estimated
, What is the correct interpretation of the intercept? - correct answer ✔✔If our explanatory
variables (x) are 0, then y^ = the intercept.
What is the correct interpretation of an explanatory variable? - correct answer ✔✔If x increases
by an amount, then our B value will increase by the amount increased by x assuming all other
variables are constant.
What does OLS allow us to find? - correct answer ✔✔Bo and B1
If there is more than one explanatory variable what regression will we use? - correct answer
✔✔Multiple regression
Total Variation (SST) - correct answer ✔✔The difference between Yi (the actual data point) and
Y (the sample mean) represents the total variation in Y (the dependent variable).
How do you calculate SST? - correct answer ✔✔Add the variation of Y (data point) from Ybar
(sample mean) for each data point together.
Explained Variation (SSR) - correct answer ✔✔The difference between Ŷi (the predicted value)
and the mean, Y, is the portion of the variation of Y from its' mean that is explained by the linear
regression model.
Unexplained Variation (SSE) - correct answer ✔✔The difference between the actual data point
Yi and the predicted value Ŷi is the residual or the unexplained portion of the variation in Y.
Total variation in Y = ? - correct answer ✔✔SST = SSR + SSE
What does Se estimate? - correct answer ✔✔The average distance of the real data points from
the estimated regression line.
answers graded A+
Limitations of Correlation Analysis (3) - correct answer ✔✔Captures only a linear relationship
May not be reliable with outliers
Not necessarily casual
Deterministic Relationship - correct answer ✔✔If the value of the response variable is uniquely
determined by the values of the explanatory variables
Stochastic Relationship - correct answer ✔✔If the value of the response variable is inexact due
to the omission of relevant factors. Typically more common than deterministic.
Population regression line - correct answer ✔✔Yi = Bo + B1Xi + Ei
OLS - correct answer ✔✔Ordinary Least Squares - a statistical technique that uses sample data
to estimate the true population relationship between two (or more) variables.
Sample regression line - correct answer ✔✔y^ = Bo + B1Xi
What does each symbol mean in the regression model:
y = Bo + B1x + e - correct answer ✔✔y - dependent variable
x - explanatory variable
e - error term
Bo & B1 - unknown parameters to be estimated
, What is the correct interpretation of the intercept? - correct answer ✔✔If our explanatory
variables (x) are 0, then y^ = the intercept.
What is the correct interpretation of an explanatory variable? - correct answer ✔✔If x increases
by an amount, then our B value will increase by the amount increased by x assuming all other
variables are constant.
What does OLS allow us to find? - correct answer ✔✔Bo and B1
If there is more than one explanatory variable what regression will we use? - correct answer
✔✔Multiple regression
Total Variation (SST) - correct answer ✔✔The difference between Yi (the actual data point) and
Y (the sample mean) represents the total variation in Y (the dependent variable).
How do you calculate SST? - correct answer ✔✔Add the variation of Y (data point) from Ybar
(sample mean) for each data point together.
Explained Variation (SSR) - correct answer ✔✔The difference between Ŷi (the predicted value)
and the mean, Y, is the portion of the variation of Y from its' mean that is explained by the linear
regression model.
Unexplained Variation (SSE) - correct answer ✔✔The difference between the actual data point
Yi and the predicted value Ŷi is the residual or the unexplained portion of the variation in Y.
Total variation in Y = ? - correct answer ✔✔SST = SSR + SSE
What does Se estimate? - correct answer ✔✔The average distance of the real data points from
the estimated regression line.
