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CHRIST (Deemed to be University),

Questions View-VI Semester
Subject : ECO632N(INTRODUCTION TO ECONOMETRICS)

U1--Introduction

U1-T1-S1--Definitions and scope of econometrics; the methodology of econometric research; Specification and estimation of an econometric model;
Basic concepts of estimation; Desirable properties of estimators; Unbiasedness, efficiency, consisistency and sufficiency.

1 What is econometrics? 2.0 Simple Descriptive

(Remembering/Understanding)
2 How can econometrics be interpreted as economic measurement? 2.0 Complex(Evaluating/Creating) Interpretative
3 Briefly discuss the concept of an estimator. 2.0 Simple Descriptive
(Remembering/Understanding)
4 How can an econometric model be used of policy making? 2.0 Complex(Evaluating/Creating) Application
5 What is meant by an unbiased estimator? Why is it a desirable property 2.0 Medium Problem Parallel 1
of an estimator? (Applying/Analysing) oriented
6 What is meant by an efficient estimator? Why is it a desirable property of an 2.0 Medium Problem 1
estimator?
(Applying/Analysing) oriented
7 What is meant by a consistent estimator? Why is it a desirable property 2.0 Medium Problem 1
of an estimator? (Applying/Analysing) oriented
8 What is meant by a sufficient estimator? Why is it a desirable property of 2.0 Medium Problem 1
an estimator? (Applying/Analysing) oriented
9 Explain the methodology of econometrics using the example of 6.0 Complex(Evaluating/Creating) Critical Parallel 2
Malthusian economics.
10 Explain how econometricians proceed in their analysis of an economic 6.0 Simple Application 2
problem using the traditional or classical methodology. (Remembering/Understanding)
11 Econometrics is an amalgam of economic theory, mathematical 6.0 Medium Descriptive Parallel 3
economics, economic statistics, and mathematical statistics, yet the (Applying/Analysing)
subject deserves to be studied in its own right. Justify.
12 What is the scope of econometrics as a separate discipline? 6.0 Medium Descriptive 3
(Applying/Analysing)

U2--Simple Linear Regression Model

U2-T1-S1--Statistical vs determininistic relationships; correlation and regression; Coeffient of determination; Estimation of an equation.
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13What is the Galton's law of universal regression? 2.0 Simple Descriptive 4

(Remembering/Understanding) Parallel
14The average height of children born of parents of a given height tended to move or 2.0 Complex(Evaluating/Creating) Descriptive 4
“regress” toward the average height in the population as a whole. Justify.
15Discuss the modern interpretation of regression using example. 2.0 Simple Descriptive 5
(Remembering/Understanding) Parallel
16Reconsider the Galton's law of universal regression and explain how modern 2.0 Complex(Evaluating/Creating) Interpretative 5
econometrics differs from the traditional view.
17Write a short note on: 6.0 Medium Descriptive 6
a) Time series data (Applying/Analysing) Parallel
b) Panel Data
c) Pooled Data
18Write a short note on: 6.0 Medium Descriptive 6
a) Cross-section data (Applying/Analysing)
b) Longitudinal Data
c) Pooled Data
19Explain the difference between statistical and deterministic relationship. 2.0 Medium Descriptive 7
(Applying/Analysing)
20Elaborate on the various data types that can be collected for econometric analysis 10.0 Medium Descriptive 6
using real-life examples. Also, differentiate between them. (Applying/Analysing)
21A statistical relationship in itself cannot logically imply causation. Justify. 2.0 Medium Interpretative
(Applying/Analysing)
22What is meant by correlation? Explain using example. 2.0 Medium Descriptive
(Applying/Analysing)
23In the given equation, 2.0 Medium Application
C = a + bY (Applying/Analysing)
identify the explanatory and dependent variables with justification.
24Elaborate on the given statement, 6.0 Complex(Evaluating/Creating) Descriptive
"Although plenty of data are available for economic research, the quality of the data is
often not that good."
25Differentiate between the following: 10.0 Simple Descriptive 7
a) Statistical v/s deterministic relationship (Remembering/Understanding) Parent-
b) Regression v/s causation Child
c) Regression v/s correlation
d) Correlation v/s causation
26What are the various categories of scale that can be adopted for primary data 10.0 Medium Descriptive
collection? Explain using examples. (Applying/Analysing)
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27With the help of an economic theory, explain how an econometrician can estimate an 6.0 Simple Descriptive
equation. (Remembering/Understanding)
28 10.0 Complex(Evaluating/Creating) Interpretative

The data presented in Table relates to the advertising budget (in millions of dollars) of
21 firms for 1983 and millions of impressions retained per week by the viewers of
these firms' products. The data are based on a survey of 4000 adults in which users of
the products were asked to cite a commercial they had seen for the product category in
the past week.
a) Plot impressions on the vertical axis and advertising expenditure on the horizontal
axis.
b) What can you say about the nature of the relationship between the two variables?
c) Looking at your graph, do you think it pays to advertise?
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U3--Estimation Theory

U3-T1-S1--OLS method: Assumptions, Gauss-markov Therom; Testing of regression coeffient; Test for regression as a whole: coeffient of
determination, F test.

29 What is meant by a two-variable regression analysis? Explain using example. 2.0 Simple Descriptive
(Remembering/Understanding)
30 Define using examples: 2.0 Simple Descriptive
a) Population (Remembering/Understanding)
b) Sample
31 Briefly explain the concept of linearity in variables for a regression model. 2.0 Medium Interpretative
(Applying/Analysing)
32 6.0 Medium Analytical 9
(Applying/Analysing)

For the given sample data on the level of education, the mean hourly wages earned
by people at each level of education, and the number of people at the stated level of
education. Plot the sample regression function.
33 X Yi Y^1i Y^2i 6.0 Medium Problem
t
(Applying/Analysing) oriented
1 4 2.929 4
4 5 7 7
5 7 8.357 8
6 12 9.714 9
Out of the two samples Y^1 & Y^2 from the same population, Yt which sample
should be chosen for econometric analysis?
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34 State the GAUSS Markov theorem. 2.0 Medium Descriptive

(Applying/Analysing)
35 Differentiate between point estimate and interval estimate. 2.0 Medium Descriptive
(Applying/Analysing)
36 Write a short note on false-positive & false-negative results that an econometrician 2.0 Complex(Evaluating/Creating) Interpretative
can get.
37 Using the concept of MPC, discuss the difference between statistical significance 2.0 Complex(Evaluating/Creating) Application
and practical significance.
38 Discuss the features of the variances of the estimates of population parameters ß1 & 2.0 Medium Descriptive 8
ß2. (Applying/Analysing)
39 Neeth Shinu, CFA, is forecasting price elasticity of supply for a certain product. 6.0 Complex(Evaluating/Creating) Problem
Shinu uses the quantity of the product supplied for the past 5months as the oriented
dependent variable and the price per unit of the product as the independent variable.
The regression results are shown below.
Regression Statistics:
Multiple R 0.9971
R Squared 0.9941
Adjusted R 0.9922
Standard Error 3.6515
Observations 5
Coefficient Standard Error t-Stat p-value
Intercept -159 10.520 (15.114) 0.001
Slope 0.26 0.012 22.517 0.000
At the 5% significant level, test the null hypothesis that the slope coefficient is
significantly different from zero.
40 State the properties of OLS estimators and the sample regression line that can be 6.0 Simple Descriptive
obtained from the sample data for OLS estimation. (Remembering/Understanding)
41 The coefficient of determination or r2 shows the goodness of fit of the sample 10.0 Medium Descriptive
regression line to a set of given data. Elaborate. (Applying/Analysing)
42 Explain the assumptions of the Classic Linear Regression Model & prove that the 10.0 Simple Descriptive 8
estimators of ß1 & ß2 are dependent on each other. (Remembering/Understanding) Parent-
Child
43 What is analysis of variance? How is it applied to carry out regression analysis? 10.0 Medium Application
(Applying/Analysing)
44 For the given sample data on the level of education (X) and the mean hourly wages 10.0 Complex(Evaluating/Creating) Analytical 9
earned by people (Y) at each level of education, estimate & interpret the quantitative Parallel
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impact of education on wages.

U4--Problems in OLS estimation

U4-T1-S1--Problem of heteroscedasticity; Auto correlation (first order); multicollinearity; their consequences, tests and remedies.

45 2.0 Complex(Evaluating/Creating) Descriptive

Which assumption of Classic Normal Linear Regression model is not

being followed in the given data? Explain.
46 Define heteroscedasticity. 2.0
Simple Descriptive
(Remembering/Understanding)
47 In the case of autocorrelation, the OLS estimators are not efficient relative 2.0 Medium Conceptual
to other linear & unbiased estimators. Justify. (Applying/Analysing)
48 Explain how inertia leads to serial correlation. 2.0 Medium Application
(Applying/Analysing)
49 Explain in detail how an econometrician detects multicollinearity is 6.0 Simple Problem
present in the data, especially with models involving more than 2 (Remembering/Understanding) oriented
explanatory variables.
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50 What are the rule-of-thumb procedures used to address the problem of 10.0 Medium Descriptive Parallel 14
multicollinearity? In which case can the researcher decide to do nothing, (Applying/Analysing)
even in the presence of multicollinearity?
51 Briefly explain why the variance of ui may be variable. 6.0 Simple Descriptive
(Remembering/Understanding)
52 What happens if an econometrician allows to use OLS in the presence of 6.0 Medium Conceptual
heteroscedasticity in data? (Applying/Analysing)
53 In most economic investigations the data for the whole population is not 10.0 Complex(Evaluating/Creating) Descriptive Parallel 15
available thus making it impossible to to have a known σi2. How can an
econometrician detect the presence of heteroscedasticity in such cases?
54 What is meant by serial correlation? Why does serial correlation occur? 10.0 Simple Descriptive Parallel 16
(Remembering/Understanding)
55 Even in the presence of autocorrelation, an estimator that is BLUE can be 6.0 Medium Descriptive
found out. Justify. (Applying/Analysing)
56 What are the consequences of carrying out OLS estimation in the presence 6.0 Medium Descriptive
of autocorrelation by disregarding it? (Applying/Analysing)
57 Critically analyse the Durbin-Watson d statistic test used for detecting 6.0 Complex(Evaluating/Creating) Conceptual
autocorrelation.
58 Write a short note on the remedial measures that can be taken to remove 6.0 Medium Descriptive
heteroscedasticity from the data with an unknown σ . 2 (Applying/Analysing)
i
59 For the given correlation matrix, 6.0 Complex(Evaluating/Creating) Problem
oriented

a) “Since the zero-order correlations are very high, there must be serious
multicollinearity.” Comment.
b) Would you drop variables Xi2 and Xi3 from the model?
60 Even if multicollinearity is very high, as in the case of near 10.0 Medium Interpretative Parallel 17
multicollinearity, the OLS estimators still retain the property of BLUE, (Applying/Analysing)
then why is multicollinearity a problem for researchers?
61 Explain the remedial measures that can be taken up in the case of strong 10.0 Medium Descriptive 14
multicollinearity? Can an econometrician decide to do nothing in case of (Applying/Analysing)
multicollinearity?
62 In most cases involving econometric investigations, heteroscedasticity 10.0 Complex(Evaluating/Creating) Descriptive 15
may be a matter of intuition, educated guesswork, prior empirical
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experience, or sheer speculation, while in other formal methods are used

to detect heteroscedasticity. Justify.
63 Explain the nature of the problem of autocorrelation. Also, discuss the 10.0 Simple Descriptive 16
various reasons for the existence of serial correlation. (Remembering/Understanding)
64 Explain the theoretical and practical consequences of multicollinearity. 10.0 Medium Descriptive 17
(Applying/Analysing)

U5--Lag models and summary variables

U5-T1-S1--Lags in econometric models: concepts, Koyck model; partial adjustment and adaptive expectation models; summary variables; qualitative
data; seasonal analysis; use of dummy variables for pooled data.

65 What is the difference between a distributed lag model & autoregressive model? 2.0 Simple Descriptive
(Remembering/Understanding)
66 Suppose a person receives a salary increase of $2,000 in annual pay, and suppose 2.0 Complex(Evaluating/Creating) Interpretative
that this is a “permanent’’ increase in the sense that the increase in salary is
maintained. What will be the effect of this increase in income on the person’s
annual consumption expenditure?
67 Using examples, explain the meaning of qualitative data. 2.0 Medium Application
(Applying/Analysing)
68 If you have monthly data over several years, how many dummy variables will you 2.0 Medium Problem
introduce to test the following hypotheses: (Applying/Analysing) oriented
a) All 12 months of the year exhibit seasonal patterns.
b) Only February, April, June, August, October, and December exhibit seasonal
patterns.
69 Describe the main reasons because of which lags occur in a data set. 6.0 Medium Descriptive
(Applying/Analysing)
70 Define seasonality as a characteristic of time series analysis. 6.0 Medium Conceptual
For the given data on quarterly sales of refrigerators from 1978 - 1985 (Applying/Analysing)
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Graphically show that seasonality exists in the data set.

71 Write a short note on the different methods of analysing qualitative data. 6.0 Simple Descriptive
(Remembering/Understanding)
72 A researcher wishes to find out if the average annual salary of public school 6.0 Complex(Evaluating/Creating) Application
teachers differs among the three geographical regions of the country, namely, North,
South & West. The simple arithmetic average of the average salaries of the teachers
in the three regions is 49538.71 for the North, 46293.59 for the South and 48104.62
for the West. Frame the regression equation for the example using dummy
variables. Also, test if the salaries in the three regions are statistically different from
each other.
*p-values: 0.5220 for North, 0.4888 for South & 0.0000 for West.
73 Although it is very easy to incorporate dummy variables in a regression model, an 10.0 Medium Descriptive
econometrician must be cautious while using them. Justify. (Applying/Analysing)
74 Explain in detail the Koyck approach to distributed-lag models. 10.0 Simple Conceptual 10
(Remembering/Understanding) Parallel
75 Explain the indigenous method of estimating distributed lag-models presented by 10.0 Simple Conceptual 10
Koyck. (Remembering/Understanding)
76 How has the Koyck model been rationalised using the adaptive expectations model? 10.0 Medium Descriptive 11
(Applying/Analysing) Parallel
77 Explain how the adaptive expectations model of rationalizing the Koyck model has 10.0 Medium Descriptive 11
filled the research gap that exists in the ad hoc Koyck model. (Applying/Analysing)
78 Explain the rationalization of Koyck model given by Marc Nerlove. 10.0 Medium Descriptive 12
(Applying/Analysing) Parallel
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79 Discuss in detail the partial adjustment model as a rationalization of the ad hoc 10.0 Complex(Evaluating/Creating) Descriptive 12
Koyck model.
80 What are the technical aspects of the dummy variable techniques with semi- 10.0 Complex(Evaluating/Creating) Descriptive
logarthmic regressors, heteroscedasticity & autocorrelation?

U6--Application of econometric methods

U6-T1-S1--Estimation of demand and supply functions, production cost functions and consumption function.

81 What is a consumption function? State its regression model. 2.0 Simple Descriptive
(Remembering/Understanding)
82 In empirical studies on Consumption Function the Distributed lag- 10.0 Complex(Evaluating/Creating) Application
models are used to estimate both the short-run and long-run
consumption functions through the partial adjustment mechanism.
Elaborate.
83 Write a short note on the econometric analysis of a linear aggregate 6.0 Medium Descriptive
consumption function. (Applying/Analysing)
84 Define MPC and write its numerical formula. 2.0 Simple Descriptive
(Remembering/Understanding)
85 State the outcome of observing a numerical value of elasticity of 2.0 Medium Interpretative
consumption expenditure with respect to disposable income as more (Applying/Analysing)
than unity.
86 Define a production function. State & explain the Cobb-Douglas 2.0 Medium Descriptive
production function. (Applying/Analysing)
87 Derive the Marginal productivity of capital & labour of a Cobb-Douglas 2.0 Complex(Evaluating/Creating) Analytical
production function.
88 Briefly explain the various types of statistical analysis that can be used 6.0 Medium Descriptive 13
to estimate a production function. (Applying/Analysing)
89 Given a Cobb-Douglas production function as Y = A KaLb. Convert the 10.0 Medium Application Parent- 13
function into its linear form & explain the following: (Applying/Analysing) Child
a) Types of statistical analysis that can be used for empirically testing
the production function
b) Limitations of statistical analysis used
c) Managerial uses of the production function
90 Write and explain any two types of cost function. Medium 2.0 Descriptive
(Applying/Analysing)
91 What is a cost function? Using examples from the real world explain the 6.0 Simple Application
5 determinants of a cost function. (Remembering/Understanding)
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92 Given a cost function, C = f (S, O, P, T, E…..), explain: 10.0 Medium Descriptive

a) Methods for the estimation of the cost function (Applying/Analysing)
b) Problems in estimating the cost function
c) Managerial uses of the cost function
93 What is the difference of ceteris paribus in economic theory and 2.0 Complex(Evaluating/Creating) Interpretative
econometrics?
94 How can an econometrician determine the returns to scale from a Cobb 2.0 Medium Descriptive
Douglas function? (Applying/Analysing)
95 The demand for a product does not remain fixed over the past. Still, 6.0 Complex(Evaluating/Creating) Descriptive
econometricians have developed various methods to estimate a demand
function. Justify.
96 Write a short note on: 10.0 Simple Descriptive
a) Randomised Trial (Remembering/Understanding)
b) Linear Regression Analysis
c) Difference in Difference
Also, explain the various stages involved in the process of demand
estimation.