Final Exam Test Updated

Which of the following correctly identifies a limitation of logarithmic transformation of variables {Ans: Logarithmic transformations cannot be used if a variable takes on a value of zero.}Suppose the variable 𝑥2 has been omitted from the following regression equation, 𝑦 = 𝛽0 + 𝛽1𝑥1 + 𝛽2𝑥2 + 𝑢. 𝛽1 ̃ is the estimator obtained when 𝑥2 is omitted from the equation. The bias in 𝛽1 ̃ is negative if _____. {Ans: 𝛽2 < 0 and 𝑥1 and 𝑥2 are positively correlated}The error term in a regression equation is said to exhibit homoskedasticty if _____. {Ans: it has the same variance for all values of the explanatory variable}The OLS estimator is derived by {Ans: minimizing the sum of squared residuals}If xi and yi are positively correlated in the sample, then the estimated slope is _____ {Ans: greater than zero}Studying inflation in the United States from 1970 to 2006 is an example of using {Ans: time series data.}