Chapter 1
1. Econometrics is the branch of economics that _____.
a. studies the behavior of individual economic agents in making economic decisions
b. develops and uses statistical methods for estimating economic relationships
c. deals with the performance, structure, behavior, and decision-making of an economy as a whole
d. applies mathematical methods to represent economic theories and solve economic problems.
2. Nonexperimental data is called _____.
a. cross-sectional data
b. time series data
c. observational data
d. panel data
3. Which of the following is true of experimental data?
a. Experimental data are collected in laboratory environments in the natural sciences.
b. Experimental data cannot be collected in a controlled environment.
c. Experimental data is sometimes called observational data.
d. Experimental data is sometimes called retrospective data.
4. An empirical analysis relies on _____to test a theory.
a. common sense
b. ethical considerations
c. data
d. customs and conventions
5. The term ‘u’ in an econometric model is usually referred to as the _____.
a. error term
b. parameter
c. hypothesis
d. dependent variable
6. The parameters of an econometric model _____.
a. include all unobserved factors affecting the variable being studied
b. describe the strength of the relationship between the variable under study and the factors affecting it
c. refer to the explanatory variables included in the model
d. refer to the predictions that can be made using the model
7. Which of the following is the first step in empirical economic analysis?
a. Collection of data
b. Statement of hypotheses
c. Specification of an econometric model
d. Testing of hypotheses
8. A data set that consists of a sample of individuals, households, firms, cities, states, countries, or a
variety of other units, taken at a given point in time, is called a(n) _____.
a. cross-sectional data set
b. longitudinal data set
c. time series data set
d. experimental data set
9. Data on the income of law graduates collected at different times during the same year is_____.
a. panel data
b. experimental data
c. time series data
d. cross-sectional data
10. A data set that consists of observations on a variable or several variables over time is called a _____
data set.
a. binary
b. cross-sectional
c. time series
d. experimental
11. Which of the following is an example of time series data?
a. Data on the unemployment rates in different parts of a country during a year.
b. Data on the consumption of wheat by 200 households during a year.
c. Data on the gross domestic product of a country over a period of 10 years.
d. Data on the number of vacancies in various departments of an organization on a particular month.
12. Which of the following refers to panel data?
a. Data on the unemployment rate in a country over a 5-year period
b. Data on the birth rate, death rate and population growth rate in developing countries over a 10-year
period.
c. Data on the income of 5 members of a family on a particular year.
d. Data on the price of a company’s share during a year.
BUSPROG: Analytic
Feedback: A panel data set consists of a time series for each cross-sectional member in the data set.
Therefore, data on the birth rate, death rate and infant mortality rate in developing countries over a 10-
year period refers to panel data.
13. Which of the following is a difference between panel and pooled cross-sectional data?
a. A panel data set consists of data on different cross-sectional units over a given period of time while a
pooled data set consists of data on the same cross-sectional units over a given period of time.
b. A panel data set consists of data on the same cross-sectional units over a given period of time while a
pooled data set consists of data on different cross-sectional units over a given period of time
c. A panel data consists of data on a single variable measured at a given point in time while a pooled
data set consists of data on the same cross-sectional units over a given period of time.
d. A panel data set consists of data on a single variable measured at a given point in time while a pooled
data set consists of data on more than one variable at a given point in time.
14. _____ has a causal effect on _____.
a. Income; unemployment
b. Height; health
c. Income; consumption
d. Age; wage
15. Which of the following is true?
a. A variable has a causal effect on another variable if both variables increase or decrease
simultaneously.
b. The notion of ‘ceteris paribus’ plays an important role in causal analysis.
c. Difficulty in inferring causality disappears when studying data at fairly high levels of aggregation.
d. The problem of inferring causality arises if experimental data is used for analysis.
16. Experimental data are sometimes called retrospective data.
17. An economic model consists of mathematical equations that describe various relationships between
economic variables.
18. A cross-sectional data set consists of observations on a variable or several variables over time.
19. A time series data is also called a longitudinal data set.
20. The notion of ceteris paribus means “other factors being equal.”