ECS3706
EXAM PACK
1
Reed Tutorials (pty) Ltd
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,ECONOMETRICS STUDY PACK
MAY/JUNE 2016
Question 1
(a) (i) Describing economic reality
(ii) Testing hypothesis about economic theory
(iii) Forecasting future economic activity
(b) (i) regression analysis is used to make quantitative estimates of economic
relationship that previously have been completely theoretical in nature.
(ii) usually population size may be too large or unknown therefore inference is made
on the sample drawn from the population using the estimated regression equation which
is the statistical technique that attempts to explain movements in one dependent
variable given independent variables
(iii) TSS is the squared variation of Y around its mean it is measured by
2
Reed Tutorials (pty) Ltd
www.reedtutorials.co.za
, ∑ . ESS is the variation of Y around its mean which is explained by the
equation it is measured by ∑ . RSS is the variation of Y around its mean
which is not explained by the equation, measured by ∑ .
TSS= ESS+RSS
(c) is the co-efficient of determination which measures the goodness of fit of the
whole equation. The problem with is that whenever an independent variable is added
it will increase even when it is an irrelevant variable. measures the percentage of the
variation of Y around its mean that is explained by the regression equation, but adjusted
for the degrees of freedom. Usually a higher fit does not guarantee a good estimation
because the fit can be only measure used.
Question 2
(a)(i) Theory which underlies the model
(ii) The statistical significance of the t-test
(iii) The which determines the goodness of fit of the whole equation
(iv) Bias
3
Reed Tutorials (pty) Ltd
www.reedtutorials.co.za
EXAM PACK
1
Reed Tutorials (pty) Ltd
www.reedtutorials.co.za
,ECONOMETRICS STUDY PACK
MAY/JUNE 2016
Question 1
(a) (i) Describing economic reality
(ii) Testing hypothesis about economic theory
(iii) Forecasting future economic activity
(b) (i) regression analysis is used to make quantitative estimates of economic
relationship that previously have been completely theoretical in nature.
(ii) usually population size may be too large or unknown therefore inference is made
on the sample drawn from the population using the estimated regression equation which
is the statistical technique that attempts to explain movements in one dependent
variable given independent variables
(iii) TSS is the squared variation of Y around its mean it is measured by
2
Reed Tutorials (pty) Ltd
www.reedtutorials.co.za
, ∑ . ESS is the variation of Y around its mean which is explained by the
equation it is measured by ∑ . RSS is the variation of Y around its mean
which is not explained by the equation, measured by ∑ .
TSS= ESS+RSS
(c) is the co-efficient of determination which measures the goodness of fit of the
whole equation. The problem with is that whenever an independent variable is added
it will increase even when it is an irrelevant variable. measures the percentage of the
variation of Y around its mean that is explained by the regression equation, but adjusted
for the degrees of freedom. Usually a higher fit does not guarantee a good estimation
because the fit can be only measure used.
Question 2
(a)(i) Theory which underlies the model
(ii) The statistical significance of the t-test
(iii) The which determines the goodness of fit of the whole equation
(iv) Bias
3
Reed Tutorials (pty) Ltd
www.reedtutorials.co.za
