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In: Economics

QUESTION TWO Consider the model:                                     Yi=β1+

QUESTION TWO

Consider the model:                                     Yi=β1+β2X1+Ui

  1. Explain all the terms included in the model above
  2. Given the model above, state the way econometricians proceed in their analysis of an economic problem?     
  3. Explain the importance of Ui in this model?What are the four reasons for the inclusion of this error term in the regression model?
  4. What is the difference between the disturbance term and the residual term?
  5. Explain the meaning of statistical inference?
  6. State the ten assumptions of the classical linear regression model and give algebraic illustrations [ if applies]
  7. State the Gauss-Markov theorem.
  8. Consider the regression models below, indicate which ones are linear in parameters or variables or both:
  1. Yi=β1+1β2Xi+ui                                                                           
  2. Yi=β1+1β2Xi2+ui

Solutions

Expert Solution

Error term is same as disturbance term.

Rahul Sunny answered 1 year ago
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