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Question: A researcher plans to study the causal

A researcher plans to study the causal effect of a strong legal system on the number of scandals in a country, using data from a random sample of countries in Asia. The researcher plans to regress the number of scandals on how strong a legal system is in the countries (an indicator variable taking the value 1 or 0, based on expert opinion). a. Do you think this regression suffers from omitted variable bias? Explain why. Which variables would you add to the regression? b. Using the expression for omitted variable bias given in Equation (6.1), assess whether the regression will likely over- or underestimate the effect of a strong legal system on the number of scandals in a country. That is, do you think that
A researcher plans to study the causal effect of a strong legal system on the number of scandals in a country, using data from a random sample of countries in Asia. The researcher plans to regress the number of scandals on how strong a legal system is in the countries (an indicator variable taking the value 1 or 0, based on expert opinion).
a. Do you think this regression suffers from omitted variable bias? Explain why. Which variables would you add to the regression?
b. Using the expression for omitted variable bias given in Equation (6.1), assess whether the regression will likely over- or underestimate the effect of a strong legal system on the number of scandals in a country. That is, do you think that


> The balance in the unearned fees account, before adjustment at the end of the year, is $23,100. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $4,620.

> The following data are taken from recent financial statements of Nike, Inc. (in millions): a. Determine the amount of change (in millions) and percent of change in net income from Year 1 to Year 2. Round to one decimal place. b. Determine the percentage

> Amazon.com, Inc. is the largest Internet retailer in the United States. Amazon’s income statements through operating income for two recent years are as follows (in millions): a. Prepare a vertical analysis of the two operating income s

> A summary of cash flows for Up-in-the-Air Travel Service for the year ended April 30, 20Y7, follows: Cash receipts: Cash received from customers ………………………………….. $1,803,000 Cash received from additional investment of owner …………. 52,000 Cash payments: Cash

> The accountant for Eva’s Laundry prepared the following unadjusted and adjusted trial balances. Assume that all balances in the unadjusted trial balance and the amounts of the adjustments are correct. Identify the errors in the accounta

> For a recent year, the balance sheet for The Campbell Soup Company includes accrued expenses of $676 million. The income before taxes for Campbell for the year was $272 million. a. Assume the adjusting entry for $676 million of accrued expenses was not r

> For a recent period, the balance sheet for Costco Wholesale Corporation reported accrued expenses of $5,675 million. For the same period, Costco reported income before income taxes of $4,442 million. Assume that the adjusting entry for $5,675 million of

> In a recent balance sheet, Microsoft Corporation reported property, plant, and equipment of $58,683 million and accumulated depreciation of $29,223 million. a. What was the book value of the fixed assets? b. Would the book value of Microsoft’s fixed asse

> The balance in the equipment account is $3,240,000, and the balance in the accumulated depreciation — equipment account is $2,134,000. a. What is the book value of the equipment? b. Does the balance in the accumulated depreciation account mean that the e

> The following data (in millions) were taken from the financial statements of Costco Wholesale Corporation: a. For Costco, determine the amount of change in millions and the percent of change (round to one decimal place) from the prior year to the recent

> The following errors took place in journalizing and posting transactions: a. Insurance of $18,000 paid for the current year was recorded as a debit to Insurance Expense and a credit to Prepaid Insurance. b. A withdrawal of $10,000 by Brian Phillips, owne

> Lowe’s Companies Inc., a major competitor of The Home Depot in the home improvement business, operates over 1,800 stores. Lowe’s recently reported the following balance sheet data (in millions): a. Determine the total

> The Home Depot is the world’s largest home improvement retailer and one of the largest retailers in the United States based on net sales volume. The Home Depot operates over 2,200 Home Depot® stores that sell a wide assortmen

> We-Sell Realty, organized August 1, 20Y9, is owned and operated by Omar Farah. How many errors can you find in the following statements for We-Sell Realty, prepared after its first month of operations?

> Using the following data for Zenith Travel Service as well as the statement of owner’s equity shown in Practice Exercise 1-5B, prepare a report form balance sheet as of August 31, 20Y4: Accounts payable …â&#128

> A summary of cash flows for Ethos Consulting Group for the year ended May 31, 20Y6, follows: Cash receipts: Cash received from customers ……………………………………… $637,500 Cash received from additional investment of owner ………….. 62,500 Cash payments: Cash paid for

> The following data (in millions) were taken from the financial statements of Target Corporation: a. For Target Corporation, determine the amount of change in millions and the percent of change (round to one decimal place) from the prior year to the rece

> The following preliminary unadjusted trial balance of Ranger Co., a sports ticket agency, does not balance: When the ledger and other records are reviewed, you discover the following: (1) The debits and credits in the cash account total $77,600 and $62,

> Financial information related to the proprietorship of Rockwell Interiors for February and March 20Y0 is as follows: a. Prepare balance sheets for Rockwell Interiors as of February 29 and March 31, 20Y0. b. Determine the amount of net income for March,

> Identify the errors in the following trial balance. All accounts have normal balances.

> Hermes Services was organized on August 1, 20Y2. A summary of the revenue and expense transactions for August follows: Fees earned …………….……. $627,600 Wages expense ……………….. 440,800 Rent expense ………….………… 28,100 Supplies expense ……………….. 6,800 Miscellaneo

> Financial information related to Pegasus Products Company, a proprietorship, for the month ended April 30, 20Y7, is as follows: Net income for April …………………………………………….. $161,000 Brian Walinsky’s withdrawals during April ……………….. 24,000 Brian Walinsky’s c

> When preparing the financial statements for the year ended October 31, accrued salaries owed to employees for October 30 and 31 were omitted. The accrued salaries were included in the first salary payment in November. Indicate which items will be erroneo

> The accounts in the ledger of Hickory Furniture Company as of December 31, 20Y6, are listed in alphabetical order below. All accounts have normal balances. The balance of the cash account has been intentionally omitted. Prepare an unadjusted trial balan

> Four different proprietorships, Dakota, Jersey, Carolina, and Iowa, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of owner’s equity, are summarized as follows: On the basis of

> Using the following data for Up-in-the-Air Travel Service as well as the statement of owner’s equity shown in Practice Exercise 1-5A, prepare a report form balance sheet as of April 30, 20Y7: Accounts payable …&acirc

> Perimeter Realty Co. pays weekly salaries of $14,800 on Friday for a five-day workweek ending on that day. Journalize the necessary adjusting entry at the end of the accounting period, assuming that the period ends (a) On Wednesday and (b) On Thursday.

> Emerald Tours Co. is a travel agency. The nine transactions recorded by Emerald Tours during May 20Y5, its first month of operations, are indicated in the following T accounts: Indicate for each debit and each credit (a) Whether an asset, liability, own

> The balance in the supplies account, before adjustment at the end of the year, is $10,680. Journalize the adjusting entry required if the amount of supplies on hand at the end of the year is $1,940.

> a. During February, $194,500 was paid to creditors on account, and purchases on account were $210,400. Assuming that the February 28 balance of Accounts Payable was $62,500, determine the account balance on February 1. b. On October 1, the accounts recei

> On September 18, 20Y4, Carbon Company purchased $8,710 of supplies on account. In Carbon Company’s chart of accounts, the supplies account is No. 15, and the accounts payable account is No. 21. a. Journalize the September 18, 20Y4, transaction on Page 87

> Simmons Consulting Co. has the following accounts in its ledger: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Michael Short, Capital; Michael Short, Drawing; Fees Earned; Rent Expense; Advertising Expense; Utilities Expense; M

> Indicate whether each of the following is identified with (1) an asset, (2) a liability, or (3) owner’s equity: a. accounts receivable b. accounts payable c. cash d. fees earned e. land f. rent expense g. supplies

> Penny Lyman is the owner and operator of Go 109, a motivational consulting business. At the end of its accounting period, December 31, 20Y1, Go 109 has assets of $659,000 and liabilities of $165,000. Using the accounting equation and considering each cas

> Determine the missing amount for each of the following:

> The total assets and total liabilities (in millions) of Dollar Tree Inc. and Target Corporation follow: Determine the stockholders’ equity of each company.

> Using the income statement for Zenith Travel Service shown in Practice Exercise 1-4B, prepare a statement of owner’s equity for the year ended August 31, 20Y4. Megan Cox, the owner, invested an additional $43,200 in the business during

> The following revenue transactions occurred during August: Aug. 4. Issued Invoice No. 162 to Oasis Enterprises Co. for services provided on account, $320. 15. Issued Invoice No. 163 to City Electric Inc. for services provided on account, $535. 25. Issued

> Refer to the table of estimated regressions, computed using data on employees in a developing country. The data set consists of information on over 10,000 full-time, full-year workers. The highest educational achievement for each worker is either a high

> Refer to the table of estimated regressions, computed using data on employees in a developing country. The data set consists of information on over 10,000 full-time, full-year workers. The highest educational achievement for each worker is either a high

> Refer to the table of estimated regressions, computed using data on employees in a developing country. The data set consists of information on over 10,000 full-time, full-year workers. The highest educational achievement for each worker is either a high

> Refer to the table of estimated regressions, computed using data on employees in a developing country. The data set consists of information on over 10,000 full-time, full-year workers. The highest educational achievement for each worker is either a high

> Refer to the table of estimated regressions, computed using data on employees in a developing country. The data set consists of information on over 10,000 full-time, full-year workers. The highest educational achievement for each worker is either a high

> Equations (7.13) and (7.14) show two formulas for the homoskedasticity-only F-statistic. Show that the two formulas are equivalent. Data from Equation 7.13: Data from Equation 7.14:

> Refer to the table of estimated regressions, computed using data on employees in a developing country. The data set consists of information on over 10,000 full-time, full-year workers. The highest educational achievement for each worker is either a high

> (Yi, X1i, X2i) satisfy the assumptions. You are interested in b1, the causal effect of X1 on Y. Suppose X1 and X2 are uncorrelated. You estimate 1 by regressing Y onto X1 (so that X2 is not included in the regression). Does this estimator suffer from om

> A government study found that people who eat chocolate frequently weigh less than people who don’t. Researchers questioned 1000 individuals from Cairo between the ages of 20 and 85 about their eating habits, and measured their weight and height. On avera

> Critique each of the following proposed research plans. Your critique should explain any problems with the proposed research and describe how the research plan might be improved. Include a discussion of any additional data that need to be collected and t

> X and Y are discrete random variables with the following joint distribution: That is, Pr (X = 3, Y = 2) = 0.04, and so forth. a. Calculate the probability distribution, mean, and variance of Y. b. Calculate the probability distribution, mean, and varianc

> Data were collected from a random sample of 200 home sales from a community in 2013. Let Price denote the selling price (in $1000s), BDR denote the number of bedrooms, Bath denote the number of bathrooms, Hsize denote the size of the house (in square fee

> Refer to the table of estimated regressions, computed using data for 2015 from the Current Population Survey. The data set consists of information on 7178 full-time, full-year workers. The highest educational achievement for each worker was either a high

> Refer to the table of estimated regressions, computed using data for 2015 from the Current Population Survey. The data set consists of information on 7178 full-time, full-year workers. The highest educational achievement for each worker was either a high

> Refer to the table of estimated regressions, computed using data for 2015 from the Current Population Survey. The data set consists of information on 7178 full-time, full-year workers. The highest educational achievement for each worker was either a high

> A school district undertakes an experiment to estimate the effect of class size on test scores in second-grade classes. The district assigns 50% of its previous year’s first graders to small second-grade classes (18 students per classroom) and 50% to reg

> Consider the regression model Yi = 1X1i + 2X2i + ui for i = 1, ……, n. Following analysis a. Specify the least squares function that is minimized by OLS. b. Compute the partial de

> (Yi, X1i, X2i) satisfy the assumption; in addition, var (ui | X1i, X2) = 4 and var (X1i) = 6. A random sample of size n = 400 is drawn from the population. a. Assume that X1 and X2 are uncorrelated. Compute the variance of ^1. b. Assume that corr (X1,

> Refer to the table of estimated regressions, computed using data for 2015 from the Current Population Survey. The data set consists of information on 7178 full-time, full-year workers. The highest educational achievement for each worker was either a high

> Consider the regression model Yi = Xi + ui, where ui and Xi satisfy the least squares assumptions. Let  denote an estimator of b that is constructed as  = Y>X, where Y and X are the sample means of Yi and Xi, respectively. a. Show that  is a linear f

> The random variable Y has a mean of 4 and a variance of 1/9. Let Z = 3 (Y – 4). Find the mean and the variance of Z.

> Suppose (Yi, Xi) satisfy the least squares assumptions in Key Concept 4.3 and, in addition, ui is N (0, 2u) and is independent of Xi. A sample of size n = 30 yields where the numbers in parentheses are the homoskedastic-only standard er

> Suppose (Yi, Xi) satisfy the least squares assumptions. A random sample of size n = 250 is drawn and yields Y^ = 5.4 + 3.2X, R2 = 0.26, SER = 6.2. (3.1) (1.5) a. Test H0: 1 = 0 vs. H1: 1 ≠ 0 at the 5% level. b. Construct a 95% confidence interval for 

> Refer to the regression described in Exercise 5.5. a. Do you think that the regression errors are plausibly homoskedastic? Explain. b. SE (^1) was computed using Equation. Suppose the regression errors were homoskedastic. Would this aff

> In the 1980s, Tennessee conducted an experiment in which kindergarten students were randomly assigned to “regular” and “small” classes and given standardized tests at the end of the

> Read the box “The Economic Value of a Year of Education: Homoskedasticity or Heteroskedasticity?”. Use the regression reported in Equation (5.23) to answer the following. a. A randomly selected 30-year-old worker repor

> Suppose a random sample of 100 25-year-old men is selected from a population and their heights and weights are recorded. A regression of weight on height yields where Weight is measured in pounds and Height is measured in inches. One man has a late growt

> Suppose that a researcher, using wage data on 200 randomly selected male workers and 240 female workers, estimates the OLS regression where Wage is measured in dollars per hour and Male is a binary variable that is equal to 1 if the person is a male and

> A researcher has two independent samples of observations on (Yi, Xi). To be specific, suppose Yi denotes earnings, Xi denotes years of schooling, and the independent samples are for men and women. Write the regression for men as Ym,i = 

> Suppose Yi = Xi + ui, where (ui, Xi) satisfy the Gauss–Markov conditions. a. Derive the least squares estimator of b, and show that it is a linear function of Y1, ……, Yn. b. Show that the estimator is conditionally unbiased. c. Derive the conditional va

> Suppose (Yi, Xi) satisfy the least squares assumptions in Key Concept 4.3 and, in addition, ui is distributed N (0, 2u) and is independent of Xi. a. Is ^1 conditionally unbiased? b. Is ^1 the best linear conditionally unbiased estimator of 1? c. How

> In a given population of two-earner male-female couples, male earnings have a mean of $50,000 per year and a standard deviation of $15,000. Female earnings have a mean of $48,000 per year and a standard deviation of $13,000. The correlation between male

> Derive the variance of b^0 under homoscedasticity given in Equation (5.28). Data from Equation 5.28:

> A random sample of workers contains nm = 100 men and nw = 150 women. The sample average of men’s weekly earnings is €565.89, and the standard deviation; is €75.62. The corresponding values for women are

> Let Xi denote a binary variable, and consider the regression Yi = 0 + 1Xi + ui. Let Y0 denote the sample mean for observations with X = 0, and let Y1 denote the sample mean for observations with X = 1. Show that ^0 = Y0, ^0 + ^1 = Y1, and ^1 = Y1 -

> Suppose a researcher, using data on class size (CS) and average test scores from 50 third-grade classes, estimates the OLS regression a. Construct a 95% confidence interval for b1, the regression slope coefficient. b. Calculate the p-value for the two-si

> a. A linear regression yields ^1 = 0. Show that R2 = 0. b. A linear regression yields R2 = 0. Does this imply that ^1 = 0?

> Suppose all of the regression assumptions in Key Concept 4.3 are satisfied except that the first assumption is replaced with E (ui | Xi) = 2. Which parts of Key Concept 4.4 continue to hold? Which change? Why? (Is ^1 normally distributed in large sampl

> Show that ^0 is an unbiased estimator of 0.

> Show that the first least squares assumption, E (ui | Xi) = 0, implies that E (Yi | Xi) = 0 + 1Xi.

> A researcher runs an experiment to measure the impact of a short nap on memory. There are 200 participants and they can take a short nap of either 60 minutes or 75 minutes. After waking up, each participant takes a short test for short-term recall. Each

> Your class is asked to investigate the effect of average temperature on average weekly earnings (AWE, measured in dollars) across countries, using the following general regression approach: One of your classmates, Rachel, is an American and decides to an

> The following table gives the joint probability distribution between employment status and college graduation among those either employed or looking for work (unemployed) in the working-age population of South Africa. a. Compute E(Y). b. The unemployment

> A regression of average monthly expenditure (AME, measured in dollars) on average monthly income (AMI, measured in dollars) using a random sample of college educated full-time workers earning €100 to €1.5 million yields

> A random sample of 100 20-year-old men is selected from a population and these men’s height and weight are recorded. A regression of weight on height yields where Weight is measured in pounds and Height is measured in inches. a. What is

> A sample (Xi, Yi), i = 1, ……, n, is collected from a population with E (Y X) = 0 + 1X and used to compute the least squares *estimators ^0 and ï&cent

> Show that the sample regression line passes through the point (X, Y).

> Suppose Yi = 0 + 1Xi + ui, where  is a nonzero constant and (Yi, Xi) satisfy the three least squares assumptions. Show that the large-sample variance of n1 is giv

> a. Show that the regression R2 in the regression of Y on X is the squared value of the sample correlation between X and Y. That is, show that R2 = r2XY. b. Show that the R2 from the regression of Y on X is the same as the R2 from the regression of X on

> Consider the regression model Yi = 0 + 1Xi + ui. a. Suppose you know that 0 = 0. Derive a formula for the least squares estimator of 1. b. Suppose you know that 0 = 4. Derive a formula for the least squares estimator of 1.

> Suppose Yi = 0 + 1Xi + ui, where (Xi, ui) are i.i.d. and Xi is a Bernoulli random variable with Pr (X = 1) = 0.30. When X = 1, ui is N (0, 3); when X = 0, ui is N (0, 2). a. Show that the regression assumptions in Key Concept 4.3 are satisfied. b. Deri

> Suppose that a researcher, using data on class size (CS) and average test scores from 50 third-grade classes, estimates the OLS regression: a. A classroom has 25 students. What is the regression’s prediction for that classroomâ&#1

> Suppose that a plant manufactures integrated circuits with a mean life of 1000 hours and a standard deviation of 100 hours. An inventor claims to have developed an improved process that produces integrated circuits with a longer mean life and the same st

> In July, Lugano’s, a city in Switzerland, daily high temperature has a mean of 65oF and a standard deviation of 5oF. What are the mean, standard deviation, and variance in degrees Celsius?

> A new version of the SAT is given to 1500 randomly selected high school seniors. The sample mean test score is 1230, and the sample standard deviation is 145. Construct a 95% confidence interval for the population mean test score for high school seniors.

> In a given population, 50% of the likely voters are women. A survey using a simple random sample of 1000 landline telephone numbers finds 55% women. Is there evidence that the survey is biased? Explain.

> Let Y1 ……, Yn be i.i.d. draws from a distribution with mean m. A test of H0:  = 10 vs. H1:  ≠ 10 using the usual t-statistic yields a p-value of 0.07. a. Does the 90% confidence interval contain m = 10? Explain. b. Can you determine if = 8 is contain

> A survey of 1000 registered voters are conducted, and the voters are asked to choose between candidate A and candidate B. Let p denote the fraction of voters in the population who prefer candidate A, and let p^ denote the fraction of voters in the sample

> Using the data in Exercise 3.3: a. Construct a 95% confidence interval for p. b. Construct a 99% confidence interval for p. c. Why is the interval in (b) wider than the interval in (a)? d. Without doing any additional calculations, test the hypothesis H0

> In a poll of 500 likely voters, 270 responded that they would vote for the candidate from the democratic party, while 230 responded that they would vote for the candidate from the republican party. Let p denote the fraction of all likely voters who prefe

> Suppose Yi∼ i.i.d. N (Y, 2Y) for i = 1, ……, n. With 2Y known, the t-statistic for testing H0: Y = 0 vs. H1: ï&shy

> Show that the pooled standard error [SEpooled (Ym – Yw)] given following Equation (3.23) equals the usual standard error for the difference in means in Equation (3.19) when the two group sizes are the same (nm = nw). Data from Equation

2.99

See Answer