Introduction to Econometrics, 4e (Stock/Watson)
Chapter 1 Economic Questions and Data
1.1 Multiple Choice Questions
1) Analyzing the behavior of unemployment rates across U.S. states in March of 2006 is
an example of using:
A) time series data.
B) panel data.
C) cross-sectional data.
D) experimental data.
Answer: C
2) Studying inflation in the United States from 1970 to 2006 is an example of using:
A) randomized controlled experiments.
B) time series data.
C) panel data.
D) cross-sectional data.
Answer: B
3) Analyzing the effect of minimum wage changes on teenage employment across the 48
contiguous U.S. states from 1980 to 2004 is an example of using:
A) time series data.
B) panel data.
C) having a treatment group vs. a control group, since only teenagers receive minimum
wages.
,D) cross-sectional data.
Answer: B
4) Panel data:
A) is also called longitudinal data.
B) is the same as time series data.
C) studies a group of people at a point in time.
D) typically uses control and treatment groups.
Answer: A
5) Econometrics can be defined as follows with the exception of:
A) the science of testing economic theory.
B) fitting mathematical economic models to real-world data.
C) a set of tools used for forecasting future values of economic variables.
D) measuring the height of economists.
Answer: D
,6) To provide quantitative answers to policy questions:
A) it is typically sufficient to use common sense.
B) you should interview the policy makers involved.
C) you should examine empirical evidence.
D) is typically impossible since policy questions are not quantifiable.
Answer: C
7) An example of a randomized controlled experiment is when:
A) households receive a tax rebate in one year but not the other.
B) one U.S. state increases minimum wages and an adjacent state does not, and
employment differences are observed.
C) random variables are controlled for by holding constant other factors.
D) some 5th graders in a specific elementary school are allowed to use computers at
school while others are not, and their end-of-year performance is compared holding
constant other factors.
Answer: D
8) Ideal randomized controlled experiments in economics are:
A) often performed in practice.
B) often used by the Federal Reserve to study the effects of monetary policy.
C) useful because they give a definition of a causal effect.
D) sometimes used by universities to determine who graduates in four years rather than
five.
Answer: C
9) Most economic data are obtained:
A) through randomized controlled experiments.
, B) by calibration methods.
C) through textbook examples typically involving ten observation points.
D) by observing real-world behavior.
Answer: D
10) One of the primary advantages of using econometrics over typical results from
economic theory, is that:
A) it potentially provides you with quantitative answers for a policy problem rather than
simply suggesting the direction (positive/negative) of the response.
B) teaching you how to use statistical packages
C) learning how to invert a 4 by 4 matrix.
D) all of the above.
Answer: A
11) In a randomized controlled experiment:
A) there is a control group and a treatment group.
B) you control for the effect that random numbers are not truly randomly generated
C) you control for random answers
D) the control group receives treatment on even days only.
Answer: A
12) The reason why economists do not use experimental data more frequently is for all of
the following reasons EXCEPT that real-world experiments:
A) cannot be executed in economics.
B) with humans are difficult to administer.
C) are often unethical.
Chapter 1 Economic Questions and Data
1.1 Multiple Choice Questions
1) Analyzing the behavior of unemployment rates across U.S. states in March of 2006 is
an example of using:
A) time series data.
B) panel data.
C) cross-sectional data.
D) experimental data.
Answer: C
2) Studying inflation in the United States from 1970 to 2006 is an example of using:
A) randomized controlled experiments.
B) time series data.
C) panel data.
D) cross-sectional data.
Answer: B
3) Analyzing the effect of minimum wage changes on teenage employment across the 48
contiguous U.S. states from 1980 to 2004 is an example of using:
A) time series data.
B) panel data.
C) having a treatment group vs. a control group, since only teenagers receive minimum
wages.
,D) cross-sectional data.
Answer: B
4) Panel data:
A) is also called longitudinal data.
B) is the same as time series data.
C) studies a group of people at a point in time.
D) typically uses control and treatment groups.
Answer: A
5) Econometrics can be defined as follows with the exception of:
A) the science of testing economic theory.
B) fitting mathematical economic models to real-world data.
C) a set of tools used for forecasting future values of economic variables.
D) measuring the height of economists.
Answer: D
,6) To provide quantitative answers to policy questions:
A) it is typically sufficient to use common sense.
B) you should interview the policy makers involved.
C) you should examine empirical evidence.
D) is typically impossible since policy questions are not quantifiable.
Answer: C
7) An example of a randomized controlled experiment is when:
A) households receive a tax rebate in one year but not the other.
B) one U.S. state increases minimum wages and an adjacent state does not, and
employment differences are observed.
C) random variables are controlled for by holding constant other factors.
D) some 5th graders in a specific elementary school are allowed to use computers at
school while others are not, and their end-of-year performance is compared holding
constant other factors.
Answer: D
8) Ideal randomized controlled experiments in economics are:
A) often performed in practice.
B) often used by the Federal Reserve to study the effects of monetary policy.
C) useful because they give a definition of a causal effect.
D) sometimes used by universities to determine who graduates in four years rather than
five.
Answer: C
9) Most economic data are obtained:
A) through randomized controlled experiments.
, B) by calibration methods.
C) through textbook examples typically involving ten observation points.
D) by observing real-world behavior.
Answer: D
10) One of the primary advantages of using econometrics over typical results from
economic theory, is that:
A) it potentially provides you with quantitative answers for a policy problem rather than
simply suggesting the direction (positive/negative) of the response.
B) teaching you how to use statistical packages
C) learning how to invert a 4 by 4 matrix.
D) all of the above.
Answer: A
11) In a randomized controlled experiment:
A) there is a control group and a treatment group.
B) you control for the effect that random numbers are not truly randomly generated
C) you control for random answers
D) the control group receives treatment on even days only.
Answer: A
12) The reason why economists do not use experimental data more frequently is for all of
the following reasons EXCEPT that real-world experiments:
A) cannot be executed in economics.
B) with humans are difficult to administer.
C) are often unethical.
