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)
d
where Q 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 = 1 + 2P + 3Pr + 4Ps + 5TAX + e
where Q is annual quantity supplied, P is the price of the product, Pr is the price of
s
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 = 1 + 2P + 3Pr + 4Ps + 5TAX + 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 1 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?
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)
d
where Q 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 = 1 + 2P + 3Pr + 4Ps + 5TAX + e
where Q is annual quantity supplied, P is the price of the product, Pr is the price of
s
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 = 1 + 2P + 3Pr + 4Ps + 5TAX + 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 1 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?
