Question

1.

Changing the unit of measurement of dependent variable, where log of the dependent variable appears in the regression:

	a.	affects only the slope coefficient.
	b.	affects neither the slope nor the intercept coefficient.
	c.	affects only the intercept coefficient.
	d.	affects both the slope and intercept coefficients.

2.

Which of the following statements is true when the dependent variable, y > 0?

	a.	Taking log of variables make OLS estimates more sensitive to extreme values.
	b.	Models using log(y) as the dependent variable may satisfy CLM assumptions more closely than models using the level of y.
	c.	Taking logarithmic form of variables make the slope coefficients more responsive to rescaling.
	d.	Taking log of a variable often expands its range.

3.

Which of the following correctly identifies a limitation of logarithmic transformation of variables?

	a.	Taking log of variables make OLS estimates more sensitive to extreme values in comparison to variables taken in level.
	b.	Logarithmic transformations cannot be used if a variable takes on zero or negative values.
	c.	Taking log of a variable often expands its range which can cause inefficient estimates.
	d.	Logarithmic transformations of variables are likely to lead to heteroskedasticity.

Answer 1