Introduction to Econometrics MCQs [set-1]

1. Two events, A and B, are said to be mutually exclusive if:

A. P(A | B) = 1

B. P(B | A) = 1

C. P(A and B) = 1

D. P(A and B) = 0

Answer: D

2. A Type I error occurs when we:

A. reject a false null hypothesis

B. reject a true null hypothesis

C. do not reject a false null hypothesis

D. do not reject a true null hypothesis

Answer: B

3. What is the meaning of the term "heteroscedasticity"?

A. The variance of the errors is not constant

B. The variance of the dependent variable is not constant

C. The errors are not linearly independent of one another

D. The errors have non- zero mean

Answer: A

4. What would be then consequences for the OLS estimator if

heteroscedasticity is present in a regression model but ignored?

A. It will be ignored

B. It will be inconsistent

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 C. It will be inefficient

D. All of a),c), b) will be true.

Answer: C

5. Which one of the following is NOT a plausible remedy for near

multicollinearity?

A. Use principal components analysis

B. Drop one of the collinear variables

C. Use a longer run of data

D. Take logarithems of each of the variables

Answer: D

6. What will be the properties of the OLS estimator in the presence of

multicollinearity?

A. It will be consistent unbiased and efficient

B. It will be consistent and unbiased but not efficient

C. It will be consistent but not unbiased

D. It will not be consistent

Answer: A

7. A sure way of removing multicollinearity from the model is to

A. Work with panel data

B. Drop variables that cause multicollinearity in the first place

C. Transform the variables by first differencing them

D. Obtaining additional sample data

Answer: B

8. Autocorrelation is generally occurred in

A. Cross-section data

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 B. Time series data

C. Pooled data

D. None of the above

Answer: B

9. The regression coefficient estimated in the presence of autocorrelation

in the sample data are NOT

A. Unbiased estimators

B. Consistent estimators

C. Efficient estimators

D. Linear estimators

Answer: C

10. In the regression function y=? + ?x +c

A. x is the regressor

B. Y is the regressor

C. x is the regressand

D. none of these

Answer: A

11. The coefficient of determination, r2 shows

A. Proportion of the variation in the dependent variable Y is explained by the independent variable
X

B. Proportion of the variation in the dependent variable X is explained by the independent variable
Y

C. Proportion of the variation in ui is explained by the independent variable X

D. Both a and c

Answer: A

12. BLUE is

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 A. Best Linear Unbiased Estimator

B. Best Linear Unconditional Estimator

C. Basic Linear Unconditional Estimator

D. Both b and c

Answer: A

13. Data on one or variables collected at a given point of time

A. Panel Data

B. Time series data

C. Pooled data

D. Cross-section data

Answer: D

14. The violation of the assumption of constant variance of the residual is

known as

A. Heteroscedasticity

B. Multicollinearity

C. Homoscedasticity

D. Autocorrelation

Answer: A

15. Formula of coefficient determination is

A. 1+RSS/TSS

B. 1-RSS/ESS

C. 1-RSS/TSS

D. 1*RSS/TSS

Answer: C

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16. In confidence interval estimation, ? = 5%, this means that this interval
includes the true ? with probability of

A. 0.50%

B. 50%

C. 5%

D. 95%

Answer: D

17. Consider a large population with a mean of 160 and a standard

deviation of 25. A random sample of size 64 is taken from this population.
What is the standard deviation of the sample mean?

A. 3.125

B. 2.5

C. 3.75

D. 5.625

Answer: A

18. In the case of multicollinearity which test will be insignificant?

A. f test

B. t test

C. both a and b

D. both are significant

Answer: B

19. Hetroscedasticity is generally occurred in

A. Cross-section data

B. Time series data

C. Pooled data

D. None of the above

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Answer: A

20. When there are both qualitative and quantitative variables are there in
the model,

A. ANOVA

B. ANCOVA

C. CHI SQUARE

D. All of the above

Answer: B

21. When is the problem of dummy variable trap occur?

A. When we take dummy variables more than the categories

B. When we take dummy variables less than the categories

C. When we take dummy variables equal to the no of categories

D. Both a and c

Answer: D

22. Durbin Watson test is associated with:

A. Heteroscedasticity

B. Multicollinearity

C. Autocorrelation

D. Both a and c

Answer: C

23. All are the types of specification errors EXCEPT:

A. Omission of relevant variable

B. Inclusion of unnecessary variable

C. errors of measurement

D. over identified

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Answer: D

24. White's test is used for the detection of ---------- -?

A. multicollinearity

B. hetroscedasticity

C. Autocorrelation

D. None of the above

Answer: B

25. Which one is not the assumption of OLS?

A. Perfect Multicollinearity

B. zero covariance between error terms

C. equal variance of disturbances

D. Mean value of disturbances is

Answer: A

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