1.

If

^
j, an unbiased estimator of

j, is consistent, then the:

becomes more and more loosely distributed around

becomes more and more tightly distributed around

c. distribution of

tends toward a standard normal distribution as the sample size grows.

d. distribution of

remains unaffected as the sample size grows.

a. distribution of

as the

sample size grows.

b. distribution of

as the sample

size grows.

2. If

^
j, an unbiased estimator of

j, is also a consistent estimator of

j, then

when the sample size tends to infinity:

^
a. the distribution of j collapses to a single value of zero.
b. the distribution of

diverges away from a single value of zero.

c. the distribution of

collapses to the single point

d. the distribution of

diverges away from

j.

j.

3. Which of the following statements is true?

a. The standard error of a regression, ^ , is not an unbiased estimator for , the
standard deviation of the error, u, in a multiple regression model.
b. In time series regressions, OLS estimators are always unbiased.
c. Almost all economists agree that unbiasedness is a minimal requirement for an estimator in
regression analysis.
d. All estimators in a regression model that are consistent are also unbiased.
4. In a multiple regression model, the OLS estimator is consistent if:
a. there is no correlation between the dependent variables and the error term.
b. there is a perfect correlation between the dependent variables and the error term.
c. the sample size is less than the number of parameters in the model.
d. there is no correlation between the independent variables and the error term.
5. If the error term is correlated with any of the independent variables, the OLS
estimators are:
a. biased and consistent.
b. unbiased and inconsistent.
c. biased and inconsistent.
d. unbiased and consistent.

6. If OLS estimators satisfy asymptotic normality, it implies that:

a. they are approximately normally distributed in large enough sample sizes.
b. they are approximately normally distributed in samples with less than 10 observations.
c. they have a constant mean equal to zero and variance equal to 2.
d. they have a constant mean equal to one and variance equal to .

7. A useful rule of thumb is that standard errors are expected to shrink at a rate that is
the inverse of the:
a. square root of the sample size.
b. product of the sample size and the number of parameters in the model.
c. square of the sample size.
d. sum of the sample size and the number of parameters in the model.
8. Which of the following statements is true under the Gauss-Markov assumptions?
a. Among a certain class of estimators, OLS estimators are best linear unbiased, but are
asymptotically inefficient.
b. Among a certain class of estimators, OLS estimators are biased but asymptotically
efficient.
c. Among a certain class of estimators, OLS estimators are best linear unbiased and
asymptotically efficient.
d. The LM test is independent of the Gauss-Markov assumptions.
Open ended questions. Elaborate following statements:
9. Even if the error terms in a regression equation, u1, u2,.., un, are not normally distributed,
the estimated coefficients can be normally distributed.
10. A normally distributed random variable is symmetrically distributed about its mean, it can
take on any positive or negative value (but with zero probability), and more than 95% of the
area under the distribution is within two standard deviations.