ECONOMETRICS EXAM 2025/2026 WITH 100%
ACCURATE ANSWERS
Dependent Variable
a variable (often denoted by y ) whose value depends on that of another. This is on the left hand
side in the econometric method
Econometric Model
An econometric model specifies the statistical relationship that is believed to hold between the
various economic quantities pertaining to a particular economic phenomenon under study
Constant
y = b1 + b2x + ei : b1 is the constant
Econometric Method
1.Formulate a theory about how the variables should be related
2. Write down the function relating the variables. this is the econometric model
3. Estimate the relationship between the variables using the appropriate statistical methods
4. Interpret and communicate the results
Independent variable
y = b1 + b2x + ei: The independent variable is x
Random Error
y = b1 + b2x + ei: The random error is ei
Residual
, y = b1 + b2x + ei: The residual is the difference between yi and y estimate. E = yi - y^
Parameter
y = b1 + b2x + ei: This is b1 and b2
Least Squares Regression
This is the method we use to estimate b1 and b2
Statistical Inference
This is the process of deducing properties of an underlying distribution by analysis of data
Micro Data
This describes individual, households or firms
Macro Data
This describes cities, states, counties or countries: Basically aggregate data
Time Series Data
This is when the data set is small (1) and the time period is large N=1; T=large (US GDP,
closing price of stock, balance in a bank account)
Cross-Sectional Data
This is when the data set is large and the time period is small. N=large; T=1 (household survey,
test scores)
Longitudinal Data
ACCURATE ANSWERS
Dependent Variable
a variable (often denoted by y ) whose value depends on that of another. This is on the left hand
side in the econometric method
Econometric Model
An econometric model specifies the statistical relationship that is believed to hold between the
various economic quantities pertaining to a particular economic phenomenon under study
Constant
y = b1 + b2x + ei : b1 is the constant
Econometric Method
1.Formulate a theory about how the variables should be related
2. Write down the function relating the variables. this is the econometric model
3. Estimate the relationship between the variables using the appropriate statistical methods
4. Interpret and communicate the results
Independent variable
y = b1 + b2x + ei: The independent variable is x
Random Error
y = b1 + b2x + ei: The random error is ei
Residual
, y = b1 + b2x + ei: The residual is the difference between yi and y estimate. E = yi - y^
Parameter
y = b1 + b2x + ei: This is b1 and b2
Least Squares Regression
This is the method we use to estimate b1 and b2
Statistical Inference
This is the process of deducing properties of an underlying distribution by analysis of data
Micro Data
This describes individual, households or firms
Macro Data
This describes cities, states, counties or countries: Basically aggregate data
Time Series Data
This is when the data set is small (1) and the time period is large N=1; T=large (US GDP,
closing price of stock, balance in a bank account)
Cross-Sectional Data
This is when the data set is large and the time period is small. N=large; T=1 (household survey,
test scores)
Longitudinal Data
