Question

Question 2: Indicate whether each of the following statements is true or false and explain concisely why. 1. The Frisch-Waugh-Lovell theorem states that in a multiple linear re- gression Y = Bo + B1X1 + B2X2 +B3X3 +34X. +U, the estimate 31 we get for B1 is what we would have obtained by regressing Y on the part of Xị that has nothing to do with X2, X3, X4, and U. 2 2. In a OLS output ý=.5+1.2log(2), the slope 1.2 is correctly interpreted as "a 1.2 percent increase in x is associated with a 1 unit increase in y, on average. 3. An estimate from an unbiased estimator may be closer to the true parameter, but may also be further away from the true parameter, when compared to an estimate from a biased estimator.

Answer 1

Sol:

question (2) ŷ = 0.5 + 12 log (7) dy diogx dy 102 lo 2 da x dy 102 = dx * 100 10o x 니. dy da 0.012. Where * 100 dx * 100 20 % Change in a X.

siope coefficient the inter foretation of is 0.012 unit increase in y due increase in x. given interpretation is not TRUE To 1 %

3).

The answer is False as an unbiased estimator is always close to the true parameter. We always prefer an unbiased estimator as it contains zero bias.

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