ALL 26 CHAPTERS COVERED
SOLUTIONS MANUAL
,Contents
Chapter 1: Descriptive Statistics 1
Chapter 2: Essentials of Probability and Estimation Procedures 7
Chapter 3: Interval Estimates and the Central Limit Theorem 13
Chapter 4: Estimation Procedures, Estimates, and Hypothesis Testing 21
Chapter 5: Ordinary Least Squares Estimation Procedure—The Mechanics 25
Chapter 6: Ordinary Least Squares Estimation Procedure—The Properties 31
Chapter 7: Estimating the Variance of an Estimate’s Probability Distribution 37
Chapter 8: Interval Estimates and Hypothesis Testing 41
Chapter 9: One-Tailed Tests, Two-Tailed Tests, and Logarithms 49
Chapter 10: Multiple Regression Analysis—Introduction 59
Chapter 11: Hypothesis Testing and the Wald Test 63
Chapter 12: Model Specification and Development 67
Chapter 13: Dummy and Interaction Variables 73
Chapter 14: Omitted Explanatory Variables, Multicollinearity, and Irrelevant
Explanatory Variables 77
Chapter 15: Other Regression Statistics and Pitfalls 83
Chapter 16: Heteroskedasticity 89
Chapter 17: Autocorrelation (Serial Correlation) 95
Chapter 18: Explanatory Variable/Error Term Independence Premise,
Consistency, and Instrumental Variables 99
Chapter 19: Measurement Error and the Instrumental Variables Estimation
Procedure 101
Chapter 20: Omitted Variables and the Instrumental Variable Estimation Procedure 105
Chapter 21: Panel Data and Omitted Variables 109
Chapter 22: Simultaneous Equations Models—Introduction 113
Chapter 23: Simultaneous Equations Models—Identification 117
Chapter 24: Binary and Truncated Dependent Variables 123
Chapter 25: Descriptive Statistics, Probability, and Random Variables—
A Closer Look 129
Chapter 26: Estimating the Mean of a Population 133
,Chapter 1: Descriptive Statistics
Solutions to Chapter 1 Prep Questions
1. One reasonable way would be to calculate the average precipitation for each month and then
choose the month with the highest average.
Solutions to Chapter 1 Review Questions
1. a. The mean is the average of the values. It describes the center of the distribution.
T
¦x
t 1
t
b. Mean[ x ]
T
3. A histogram illustrates how the values of a single data variable are distributed.
5. a. Yes.
b. No.
7. a. Cov[x, y] > 0 0 < CorrCoef[x, y] d 1
b. Cov[x, y] < 0 1 d CorrCoef[x, y] < 0
c. Cov[x, y] | 0 CorrCoef[x, y] | 0
Solutions to Chapter 1 Exercises
1. a.
Inches of
Precipitation 1964 1975
0–1 2 0
1–2 3 0
2–3 3 2
3–4 3 3
4–5 0 3
5–6 1 1
6–7 0 1
7–8 0 0
8–9 0 1
9–10 0 0
10–11 0 1
1
, b.
3. a. 1975 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Precip 4.39 3.04 3.97 2.87 2.10 4.68 10.56 6.13 8.63 4.90 5.08 3.90
TwoPlusPrecip 6.39 5.04 5.97 4.87 4.10 6.68 12.56 8.13 10.63 6.90 7.08 5.90
b.
2
SOLUTIONS MANUAL
,Contents
Chapter 1: Descriptive Statistics 1
Chapter 2: Essentials of Probability and Estimation Procedures 7
Chapter 3: Interval Estimates and the Central Limit Theorem 13
Chapter 4: Estimation Procedures, Estimates, and Hypothesis Testing 21
Chapter 5: Ordinary Least Squares Estimation Procedure—The Mechanics 25
Chapter 6: Ordinary Least Squares Estimation Procedure—The Properties 31
Chapter 7: Estimating the Variance of an Estimate’s Probability Distribution 37
Chapter 8: Interval Estimates and Hypothesis Testing 41
Chapter 9: One-Tailed Tests, Two-Tailed Tests, and Logarithms 49
Chapter 10: Multiple Regression Analysis—Introduction 59
Chapter 11: Hypothesis Testing and the Wald Test 63
Chapter 12: Model Specification and Development 67
Chapter 13: Dummy and Interaction Variables 73
Chapter 14: Omitted Explanatory Variables, Multicollinearity, and Irrelevant
Explanatory Variables 77
Chapter 15: Other Regression Statistics and Pitfalls 83
Chapter 16: Heteroskedasticity 89
Chapter 17: Autocorrelation (Serial Correlation) 95
Chapter 18: Explanatory Variable/Error Term Independence Premise,
Consistency, and Instrumental Variables 99
Chapter 19: Measurement Error and the Instrumental Variables Estimation
Procedure 101
Chapter 20: Omitted Variables and the Instrumental Variable Estimation Procedure 105
Chapter 21: Panel Data and Omitted Variables 109
Chapter 22: Simultaneous Equations Models—Introduction 113
Chapter 23: Simultaneous Equations Models—Identification 117
Chapter 24: Binary and Truncated Dependent Variables 123
Chapter 25: Descriptive Statistics, Probability, and Random Variables—
A Closer Look 129
Chapter 26: Estimating the Mean of a Population 133
,Chapter 1: Descriptive Statistics
Solutions to Chapter 1 Prep Questions
1. One reasonable way would be to calculate the average precipitation for each month and then
choose the month with the highest average.
Solutions to Chapter 1 Review Questions
1. a. The mean is the average of the values. It describes the center of the distribution.
T
¦x
t 1
t
b. Mean[ x ]
T
3. A histogram illustrates how the values of a single data variable are distributed.
5. a. Yes.
b. No.
7. a. Cov[x, y] > 0 0 < CorrCoef[x, y] d 1
b. Cov[x, y] < 0 1 d CorrCoef[x, y] < 0
c. Cov[x, y] | 0 CorrCoef[x, y] | 0
Solutions to Chapter 1 Exercises
1. a.
Inches of
Precipitation 1964 1975
0–1 2 0
1–2 3 0
2–3 3 2
3–4 3 3
4–5 0 3
5–6 1 1
6–7 0 1
7–8 0 0
8–9 0 1
9–10 0 0
10–11 0 1
1
, b.
3. a. 1975 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Precip 4.39 3.04 3.97 2.87 2.10 4.68 10.56 6.13 8.63 4.90 5.08 3.90
TwoPlusPrecip 6.39 5.04 5.97 4.87 4.10 6.68 12.56 8.13 10.63 6.90 7.08 5.90
b.
2
