Question

Select the answer that correctly identifies how many of the following statements are true for a simple linear regression model. I) It has one independent and one dependent variable. II) It describes a straight line relationship between the two variables. III) It has no error term. IV) The slope parameter and the correlation coefficient will have the same sign.

A Only one of the statements is true. B Exactly two of the statements are true. C Exactly three of the statements are true. D All four of the statements are true.

Answer 1

It has one dependent and 1 independent variable - True

It describes a straight line relationship between the 2 variables - True

It has no error term - False

The slope parameter and the correlation co-efficient will have the same sign - True

Therefore OPTION C- Exactly three of the statements are true.