Question

Suppose we believe that inequality (q) is related nonlinearly to economic growth (g), so we estimate the model gi = β0 +β1qi +β2q 2 i +β3q 3 i for i=1,..,N. We can test the null hypothesis that they are linearly related: a) Using a t test for β1 = 0, β2 = 0 and β3 = 0 b) Using a direct test for β1 = β2 = β3 = 0 c) Using a F test with the null β2 = 0 and β3 = 0 d) Using a t test with the null q 2 i = 0 and q 3 i = 0

Answer 1

The answer is c) Using a F test with the null B2=0 and B3=0

this will make the model :

gi = B0 + B1qi

this model will give the linear relationship between gi and qi.