regression of the logarithm of expenditure on gasoline on the log of personal disposable income and the log of the price of gasoline.

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

SECTION A: Question 1 is compulsory and must be attempted

Question 1

The model below is a regression of the logarithm of expenditure on gasoline on the log of personal disposable income and the log of the price of gasoline.

a. The following test is conducted to verify which assumption has been violated. Study the output below (model6) and identify the name of the test, state the null hypothesis and carry out the test. (20marks)

b. The following test is conducted to verify which assumption has been violated. Study the output below (model7) and identify the name test, state the null hypothesis and carry out the test. (20marks)

(total: 40 marks)

SECTION B: Attempt any TWO questions in this section

Question 2

We are estimating the relationship between being divorced and congnitive ability, level of schooling, age, earnings, weight, faith(christrianty), ethnicity and gender. The variables are DIVORCED coded 1 and 0 not divorced, S, ASVBC, AGE, EARNINGS, WEIGHT, FEMALE(1 and 0 male), FAITHC(Christian 1 and 0 other), ETHBLACK(1 and 0 other) and ETHWHITE(1 and 0 other). The DIVORCED variable is binary response. We run a logit

model with the following probability density function

Calculate the marginal effects of each variable and interpret them. (20marks)

(Total: 20 marks)

Question 3

i. The data below indicate the relationship between the cost for an institution and the number of enrolments with dummy variables for the type of school. The variables such as RES is residential school coded 1 and 0 for non-residential school, TECH is coded 1 for technical school and 0 for other school, WORKER is 1 for skilled workers and 0 for other, VOC is 1 for vocational schools and o for others. GEN is coded 1 for general schools and 0 others.

A. Using output from model 4 state all available equations that you can formulate.

(5marks)

B. Interpret the coefficients. (5marks)

ii. The second output data below indicate the relationship between the cost for an institution and the number of enrolments with dummy variables for the type of school which are either occupational school (1)or regular school (0)and residential (1)or non-residential schools (0). The variable NOCC is a product of enrolment and OCC.

A. Using output from model 2 state all available equations that you can formulate.

(5marks)

B. Interpret the coefficients. (5marks)

(Total: 20 marks)

Question 4

The output gives the results of a logarithmic regression of expenditure on food on disposable personal income and the relative price of food. Study the outputs and answer the questions below

A. What is the short run relationship we have from the output? (6marks)

B. What is the long run relationship we have? (6marks)

C. Carry out a test for autocorrelation that is possible from the output.(6marks)

D. What model would this be? (2marks)

Attachments:

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