Introduction to Econometrics

Prof. Brendan Kline

SAMPLE Midterm Exam #2

Disclaimer: you can use this sample midterm to get an idea of the sorts of questions that
might appear on the real midterm exam, but you should not expect the real midterm exam to
necessarily follow this format exactly.
Name:

EID:

Rules:
1. The exam is closed book. You may refer only to the exam and the provided formula sheet
and critical values.
2. You are not allowed to use any sort of electronic device (e.g., no calculators, com-
puters, cell phones, etc. are allowed.)
3. There are a total of 75 points possible. Each part is worth the indicated number of
points.
4. Be sure to show any work. Partial credit may be given. The justifications/explanations
for your answers are important.
5. Also be sure that your answers are written clearly and coherently. Write your answers
in the provided space (using the backs of pages as necessary). If there is any possibility of
confusion, be sure to clearly indicate your final answer.

Suggestions:
6. Do not spend too much time on any one part; skip parts if you get stuck. The questions are
not necessarily in order of difficulty.
7. There are 75 points, and 75 minutes to complete the exam.
8. A “formula sheet” and critical values are stapled to the front of the exam.

1
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1. Suppose that you have cross-sectional data, where each row in the dataset is a person.
Suppose that you run the following multiple linear regression of the number of minutes slept
during a week (sleep) on the number of minutes worked during a week (totwrk), age (age,
measured in years), a binary variable for whether the person is male (male, equals one when
male and zero otherwise), and a binary variable for whether the person is black (black, equals
one when black and zero otherwise). Some parts of the Stata output have been removed.
. regress sleep totwrk age male black

Source | SS df MS Number of obs = 706

-------------+------------------------------ F( 4, 701) = 23.30
Model | 16337756.9 4 4084439.21 Prob > F = 0.0000
Residual | 122902079 701 175323.936 R-squared = 0.1173
-------------+------------------------------ Adj R-squared = 0.1123
Total | 139239836 705 197503.313 Root MSE = 418.72

------------------------------------------------------------------------------
sleep | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
totwrk | -.1660913 .0180073 -.2014461 -.1307365
age | 2.666409 1.396876 1.91 0.057
male | 84.07824 34.40426 2.44 0.015 16.5305 151.626
black | -56.88764 72.83855 -0.78 0.435 -199.8955 86.1202
_cons | 3470.639 68.42734 50.72 0.000 3336.292 3604.986
------------------------------------------------------------------------------
This regression is referred to as Regression 1.

(a) [2 points] The estimate of the slope coefficient on totwrk is (fill in

the blank). What does this number mean in terms of how working relates to sleeping, and
other factors (as appropriate)? Be as specific as possible.
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(b) [3 points] Is the coefficient on totwrk statistically significant from zero at the 5% significance
level? (Yes, no, or not enough information). Be sure to explain your
answer, and/or show any work.

(c) [2 points] The estimate of the slope coefficient on black is (fill in

the blank). What does this number mean in terms of how race relates to sleeping, and other
factors (as appropriate)? Be as specific as possible.

(d) [2 points] Is the coefficient on black statistically significant from zero at the 5% signif-
icance level? (Yes, no, or not enough information). Be sure to explain
your answer, and/or show any work.
4

(e) [4 points] Can you reject the null hypothesis that the coefficient on black equals negative
sixty at the 5% significance level? (Yes, no, or not enough information).
Be sure to explain your answer, and/or show any work. Also, what is the special meaning of
this null hypothesis (in terms of interpretation of the units of measurement)?

(f) [3 points] The 95% confidence interval for the coefficient on age is missing from the regression
output, but there is enough information provided for you to calculate it yourself. The 95% con-
fidence interval for age is
(fill in the blank). You do not need to simplify any complicated calculations. Be sure to show
any work.

(g) [3 points] A colleague suggests to also include an explanatory variable called white, so
that you would end up running a regression of sleep on totwrk, age, male, black, and white.
The white variable would equal one if the person is white, and would equal zero otherwise.
State the (simplest!) issue that this regression might raise in terms of satisfying MLR.3. What
condition on the data is required to make sure that this concern is not correct (i.e., what
condition is necessary so that MLR.3 is satisfied)? Be as precise as you can.
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(h) [3 points] Suppose that the colleague runs the regression in (g), and finds that the estimated
slope coefficient on black is −61 and the estimated slope coefficient on white is −11. According
to those estimates, what is the estimated difference in minutes slept during a week between
a black person and a white person, holding fixed minutes spent working, age, and gender?
(fill in the blank). You do not need to
simplify any complicated calculations. Be sure to show any work, and be specific about the
interpretation of your numerical answer.

(i) [3 points] Suppose that a colleague tells you that the variance of minutes slept during a
week for young people is much higher than the variance of minutes slept during a week for
older people, even after controlling for the number of minutes worked during a week, gender,
and race. If true, would this violate one or more of assumptions MLR.1-MLR.6? Explain why
or why not.

(j) [4 points] A colleague points out that the number of minutes slept per week must be a
positive number. State the (simplest!) issue that fact might raise in terms of satisfying as-
sumptions MLR.1-MLR.6.
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Next, you run the following multiple linear regression, where now you use the square root of
totwrk instead of totwrk itself. The variable sqrttotwrk is the new explanatory variable, and
√
is defined to be sqrttotwrk = totwrk.
. regress sleep sqrttotwrk age male black

Source | SS df MS Number of obs = 706

-------------+------------------------------ F( 4, 701) = 18.45
Model | 13261836.1 4 3315459.04 Prob > F = 0.0000
Residual | 125978000 701 179711.84 R-squared = 0.0952
-------------+------------------------------ Adj R-squared = 0.0901
Total | 139239836 705 197503.313 Root MSE = 423.92

------------------------------------------------------------------------------
sleep | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
sqrttotwrk | -10.19403 1.255935 -8.12 0.000 -12.65988 -7.728185
age | 2.795636 1.413967 1.98 0.048 .0195188 5.571753
male | 60.42003 34.36072
black | -50.03023 73.7381
_cons | 3574.998 79.32636 45.07 0.000 3419.252 3730.743
------------------------------------------------------------------------------
This regression is referred to as Regression 2.

(k) [4 points] Based on Regression 2: The estimated marginal effect of the number of min-
utes worked per week on minutes slept per week, holding fixed age, gender, and race, is
(fill in the blank). Hint: your answer should in-
volve totwrk as a variable. Be sure to show any work, and/or explain your answer.
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(l) [3 points] Based on Regression 2: Does the absolute value of the estimated marginal effect
from part (h) increase, decrease, or stay the same as a function of totwrk?
(Increase, decrease, stay the same, or not enough information). Be sure to show any work,
and/or explain your answer. Hint: Is the absolute value of the estimated marginal effect
greater when totwrk = l or when totwrk = h, when l < h?

(m) [3 points] Based on Regression 2: State the null hypothesis that the number of minutes
worked per week has no effect on minutes slept per week, holding fixed age, gender, and race.
Be sure to show any work, and/or explain your
answer. Use the notation that βX is the coefficient on variable X. So, for example, βage is the
coefficient on age.

(n) [4 points] Based on Regression 2: State the null hypothesis that being 20 years older (holding
fixed all of the other explanatory variables) has the same effect on minutes slept per week as does
being black compared to being non-black (holding fixed all of the other explanatory variables).
Be sure to show any work, and/or explain your
answer. Use the notation that βX is the coefficient on variable X. So, for example, βage is the
coefficient on age.
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(o) [3 points] What is a Stata command that could be used to test the hypothesis in part (n)?
Be precise.

(p) [3 points] Based on Regression 2: What is the prediction of the average minutes slept
during a week for someone who: works 2500 minutes per week, is 35 years old, is female, and
is black? You do not need to simplify any complicated calculations. Hint: your answer will
√
involve 2500 = 50.

(q) [3 points] Based on Regression 2: What is a Stata command that could be used to compute
a 95% confidence interval for the prediction in part (p)? Be precise.

(r) [3 points] Based on Regression 2: State the null hypothesis that men sleep one hour more
than women per week, holding fixed minutes worked per week, age, and race.
Be sure to show any work, and/or explain your answer. Use the notation that βX is the coeffi-
cient on variable X. So, for example, βage is the coefficient on age.
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(s) [3 points] Based on Regression 2: Can you reject the null hypothesis from part (r) at the
5% significance level? yes, no, or not enough information to say. Circle your answer. Be sure
to show any work, and/or explain your answer.

(t) [3 points] Based on Regression 2: Suppose instead you run the regression of sleep on
sqrttotwrk, age, female, and black. The new variable female is a binary variable for whether
the person is female (equals one when female and zero otherwise). What will the slope coefficient
on female be in this new regression? Be sure to show any work, and/or
explain your answer. You do not need to simplify any calculations
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2. General questions

All of the following questions concern the following general setup. Suppose that you run
the multiple linear regression of y on x1 through xk . (That is: you estimate the model y =
β0 + β1 x1 + · · · + βk xk + u.) Suppose that you test the null hypothesis that β1 = 0.

(a) [3 points] Suppose your answer is that you reject the null hypothesis at the 5% significance
level. Based on this information, will you also reject the null hypothesis at the 1% significance
level? yes, no, or not enough information to say. Circle your answer. Be sure to show any
work, and/or explain your answer.

(b) [3 points] Now, instead, suppose your answer is that you do not reject the null hypothesis
at the 5% significance level. Based on this information, will you reject the null hypothesis at
the 1% significance level? yes, no, or not enough information to say. Circle your answer. Be
sure to show any work, and/or explain your answer.

(c) [3 points] Now, instead, suppose your answer is that you reject the null hypothesis at the
1% significance level. Based on this information, will you also reject the null hypothesis at the
5% significance level? yes, no, or not enough information to say. Circle your answer. Be sure
to show any work, and/or explain your answer.
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(d) [3 points] Suppose your answer is that you reject the null hypothesis at the 5% significance
level. Based on this information, will you also reject the null hypothesis that β2 = 0 at the 5%
significance level? yes, no, or not enough information to say. Circle your answer. Be sure to
show any work, and/or explain your answer.

(e) [2 points] Suppose that your answer is that you reject the null hypothesis at the 5% signif-
icance level. Based on this information, will the 95% confidence interval contain the number
0? yes, no, or not enough information to say. Circle your answer. Be sure to show any work,
and/or explain your answer.