1. A dependent variable is also known as a(n) _____.

a. explanatory variable
b. control variable
c. predictor variable
d. response variable
ANSWER: d
RATIONALE: FEEDBACK: A dependent variable is known as a response variable.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: Definition of the Simple Regression Model
KEYWORDS: Bloom’s: Knowledge

2. If a change in variable x causes a change in variable y, variable x is called the _____.

a. dependent variable
b. explained variable
c. explanatory variable
d. response variable
ANSWER: c
RATIONALE: FEEDBACK: If a change in variable x causes a change in variable y, variable x is called the
independent variable or the explanatory variable.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STAND United States - BUSPROG: Analytic
ARDS:
TOPICS: Definition of the Simple Regression Model
KEYWORDS: Bloom’s: Comprehension

3. In the equation is the _____.

a. dependent variable
b. independent variable
c. slope parameter
d. intercept parameter
ANSWER: d
RATIONALE:
FEEDBACK: In the equation is the intercept parameter.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: Definition of the Simple Regression Model
KEYWORDS: Bloom’s: Knowledge

4. In the equation , what is the estimated value of ?

a.

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 b.
c.

d.

ANSWER: a
RATIONALE:
FEEDBACK: The estimated value of is .
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: Deriving the Ordinary Least Squares Estimates
KEYWORDS: Bloom’s: Knowledge

th
5. In the equation , c denotes consumption and i denotes income. What is the residual for the 5

observation if =$500 and =$475?

a. $975
b. $300
c. $25
d. $50
ANSWER: c
RATIONALE: th
FEEDBACK: The formula for calculating the residual for the i observation is . In this

case, the residual is

POINTS: 1
DIFFICULTY: Easy
NATIONAL STAN United States - BUSPROG: Analytic
DARDS:
TOPICS: Deriving the Ordinary Least Squares Estimates
KEYWORDS: Bloom’s: Application

6. What does the equation denote if the regression equation is ?

a. The explained sum of squares
b. The total sum of squares
c. The sample regression function
d. The population regression function
ANSWER: c
RATIONALE:
FEEDBACK: The equation denotes the sample regression function of the given
regression model.
POINTS: 1
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DIFFICULTY: Easy
NATIONAL STANDAR United States - BUSPROG: Analytic
DS:
TOPICS: Deriving the Ordinary Least Squares Estimates
KEYWORDS: Bloom’s: Knowledge

7. If xi and yi are positively correlated in the sample then the estimated slope is _____.
a. less than zero
b. greater than zero
c. equal to zero
d. equal to one
ANSWER: b
RATIONALE: FEEDBACK: If xi and yi are positively correlated in the sample then the estimated slope is
greater than zero.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARD United States - BUSPROG: Analytic
S:
TOPICS: Deriving the Ordinary Least Squares Estimates
KEYWORDS: Bloom's: Knowledge

8. The sample correlation between xi and yi is denoted by _____.

a.

b.
c.
d.
ANSWER: d
RATIONALE: FEEDBACK: The sample correlation between xi and yi is denoted by .
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: Deriving the Ordinary Least Squares Estimates
KEYWORDS: Bloom's: Knowledge

9. Consider the following regression model: y = 0 + 1x1 + u. Which of the following is a property of Ordinary Least
Square (OLS) estimates of this model and their associated statistics?
a. The sum, and therefore the sample average of the OLS residuals, is positive.
b. The sum of the OLS residuals is negative.
c. The sample covariance between the regressors and the OLS residuals is positive.
d.
The point ( ) always lies on the OLS regression line.
ANSWER: d
RATIONALE:
FEEDBACK: An important property of the OLS estimates is that the point ( ) always lies on the

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 OLS regression line. In other words, if , the predicted value of y is .
POINTS: 1
DIFFICULTY: Easy
NATIONAL STAN United States - BUSPROG: Analytic
DARDS:
TOPICS: Properties of OLS on Any Sample of Data
KEYWORDS: Bloom’s: Knowledge

10. The explained sum of squares for the regression function, , is defined as _____.
a.

b.

c.

d.

ANSWER: b
RATIONALE:

FEEDBACK: The explained sum of squares is defined as .

POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: Properties of OLS on Any Sample of Data
KEYWORDS: Bloom’s: Knowledge

11. If the total sum of squares (SST) in a regression equation is 81, and the residual sum of squares (SSR) is 25, what is
the explained sum of squares (SSE)?
a. 64
b. 56
c. 32
d. 18
ANSWER: b
RATIONALE: FEEDBACK: Total sum of squares (SST) is given by the sum of explained sum of squares (SSE) and
residual sum of squares (SSR). Therefore, in this case, SSE=81-25=56.
POINTS: 1
DIFFICULTY: Moderate
NATIONAL STAN United States - BUSPROG: Analytic - BUSPROG: Analytic
DARDS:
TOPICS: Properties of OLS on Any Sample of Data
KEYWORDS: Bloom’s: Application

12. If the residual sum of squares (SSR) in a regression analysis is 66 and the total sum of squares (SST) is equal to 90,
what is the value of the coefficient of determination?
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 a. 0.73
b. 0.55
c. 0.27
d. 1.2
ANSWER: c
RATIONALE:

FEEDBACK: The formula for calculating the coefficient of determination is . In

this case, .
POINTS: 1
DIFFICULTY: Moderate
NATIONAL STANDA United States - BUSPROG: Analytic - BUSPROG: Analytic
RDS:
TOPICS: Properties of OLS on Any Sample of Data
KEYWORDS: Bloom’s: Application

13. Which of the following is a nonlinear regression model?

a. y= + x +u
1/2
0 1
b. log y = +
0 1log x +u
c. y=1/( +
0 1x) +u
d. y= +
0 1x +u
ANSWER: c
RATIONALE: FEEDBACK: A regression model is nonlinear if the equation is nonlinear in the parameters. In this
case, y = 1 / ( 0 + 1x) + u is nonlinear as it is nonlinear in its parameters.
POINTS: 1
DIFFICULTY: Moderate
NATIONAL STAN United States - BUSPROG: Analytic
DARDS:
TOPICS: Properties of OLS on Any Sample of Data
KEYWORDS: Bloom’s: Comprehension

14. In a regression equation, changing the units of measurement of only the independent variable does not affect the
_____.
a. dependent variable
b. slope
c. intercept
d. error term
ANSWER: c
RATIONALE: FEEDBACK: In a regression equation, changing the units of measurement of only the independent
variable does not affect the intercept.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STAND United States - BUSPROG: Analytic
ARDS:
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TOPICS: Units of Measurement and Functional Form
KEYWORDS: Bloom's: Knowledge

15. Which of the following is assumed for establishing the unbiasedness of Ordinary Least Square (OLS) estimates?
a. The error term has an expected value of 1 given any value of the explanatory variable.
b. The regression equation is linear in the explained and explanatory variables.
c. The sample outcomes on the explanatory variable are all the same value.
d. The error term has the same variance given any value of the explanatory variable.
ANSWER: d
RATIONALE: FEEDBACK: The error u has the same variance given any value of the explanatory variable.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: Expected Values and Variances of the OLS Estimators
KEYWORDS: Bloom’s: Knowledge

16. The error term in a regression equation is said to exhibit homoskedasticty if _____.
a. it has zero conditional mean
b. it has the same variance for all values of the explanatory variable
c. it has the same value for all values of the explanatory variable
d. if the error term has a value of one given any value of the explanatory variable
ANSWER: b
RATIONALE: FEEDBACK: The error term in a regression equation is said to exhibit homoskedasticty if it has the
same variance for all values of the explanatory variable.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STAN United States - BUSPROG: Analytic
DARDS:
TOPICS: Expected Values and Variances of the OLS Estimators
KEYWORDS: Bloom’s: Knowledge

17. In the regression of y on x, the error term exhibits heteroskedasticity if _____.

a. it has a constant variance
b. Var(y|x) is a function of x
c. x is a function of y
d. y is a function of x
ANSWER: b
RATIONALE: FEEDBACK: Heteroskedasticity is present whenever Var(y|x) is a function of x because Var(u|x)
= Var(y|x).
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARD United States - BUSPROG: Analytic
S:
TOPICS: Expected Values and Variances of the OLS Estimators
KEYWORDS: Bloom’s: Knowledge

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18. What is the estimated value of the slope parameter when the regression equation, y = 0 + 1x1 + u passes through the
origin?
a.

b.

c.

d.

ANSWER: c
RATIONALE: FEEDBACK: The estimated value of the slope parameter when the regression equation passes

through the origin is .

POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDA United States - BUSPROG: Analytic
RDS:
TOPICS: Regression through the Origin and Regression on a Constant
KEYWORDS: Bloom’s: Knowledge

19. A natural measure of the association between two random variables is the correlation coefficient.
a. True
b. False
ANSWER: True
RATIONALE: FEEDBACK: A natural measure of the association between two random variables is the
correlation coefficient.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDAR United States - BUSPROG: Analytic
DS:
TOPICS: Definition of the Simple Regression Model
KEYWORDS: Bloom’s: Knowledge

20. Simple regression is an analysis of correlation between two variables.

a. True
b. False
ANSWER: True
RATIONALE: FEEDBACK: Simple regression is an analysis of correlation between two variables.
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POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: Deriving the Ordinary Least Squares Estimates
KEYWORDS: Bloom's: Knowledge

21. The sample covariance between the regressors and the Ordinary Least Square (OLS) residuals is always positive.
a. True
b. False
ANSWER: False
RATIONALE: FEEDBACK: The sample covariance between the regressors and the Ordinary Least Square
(OLS) residuals is zero.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDAR United States - BUSPROG: Analytic
DS:
TOPICS: Properties of OLS on Any Sample of Data
KEYWORDS: Bloom’s: Knowledge

2
22. R is the ratio of the explained variation compared to the total variation.
a. True
b. False
ANSWER: True
RATIONALE: FEEDBACK: The sample covariance between the regressors and the Ordinary Least Square
(OLS) residuals is zero.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDAR United States - BUSPROG: Analytic
DS:
TOPICS: Properties of OLS on Any Sample of Data
KEYWORDS: Bloom’s: Knowledge

23. There are n-1 degrees of freedom in Ordinary Least Square residuals.
a. True
b. False
ANSWER: False
RATIONALE: FEEDBACK: There are n-2 degrees of freedom in Ordinary Least Square residuals.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: Expected Values and Variances of the OLS Estimators
KEYWORDS: Bloom’s: Knowledge

24. The variance of the slope estimator increases as the error variance decreases.
a. True
b. False

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ANSWER: False
RATIONALE: FEEDBACK: The variance of the slope estimator increases as the error variance increases.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARDS: United States - BUSPROG: Analytic
TOPICS: Expected Values and Variances of the OLS Estimators
KEYWORDS: Bloom’s: Knowledge

25. In general, the constant that produces the smallest sum of squared deviations is always the sample average.
a. True
b. False
ANSWER: True
RATIONALE: FEEDBACK: In general, the constant that produces the smallest sum of squared deviations is
always the sample average.
POINTS: 1
DIFFICULTY: Easy
NATIONAL STANDARUnited States - BUSPROG: Analytic
DS:
TOPICS: Regression through the Origin and Regression on a Constant
KEYWORDS: Bloom's: Knowledge

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