Problem
1) (a) Write down the definition of heteroscedasticity. What problem doesthe presence of it cause for the OLS estimator?
(b) Explain whatismulticollinearity. What problem does thepresenceof it cause for the OLS estimator?
2) (a) Explain the difference between cross-sectional data and time series data. Give examples of each.
(b) Explain the difference between linear in the variables and linear in theparameters. Give examples of each.
3) (a) Give four reasons why we introduce a stochastic disturbance term.
(b) Which four assumptions does the classical linear regression model makeabout the random error term u? Explain.
(c) Which other six assumptions does the classical linear regression modelmake?
4) The following regression output represents food expenditure in Morocco:
FoodExpi = 94.2087 + 0.4368TotalExpi
Se = (50.8563) (0.0783)
t = (1.8524) (5.5770)
p = (0.0695) (0.0000)*
r2 = 0.3698 df = 53
F1.53 = 31.1034 (p value = 0.0000)*
Where * denotes extremely small.
(a) How do you interpret this regression?
(b) Test the null hypothesis that there is no relationship between food expenditure and total expenditure. Which test do you use and why?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.