An example of a confidence interval is ________. A) A Wall ...

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An example of a confidence interval is ________.
 
  A) A Wall Street Journal poll reports that 45 - 48 of farmers produce grains
  B) A New York Times survey states that more than 65 of American families own their own homes
  C) A Gallup poll reports that 56  3 of voters support candidate A
  D) An editorial in Smart Money magazine states that the President is confident he will be re-elected

Question 2

An economist estimates the regression model yi= 0 + 1x1i + 2x2i + i. The estimates of the parameters 1 and 2 are not very large compared with their respective standard errors.
 
  But the size of the coefficient of determination indicates quite a strong relationship between the dependent variable and the pair of independent variables. Having obtained these results, the economist strongly suspects the presence of multicollinearity. Since his chief interest is in the influence of X1 on the dependent variable, he decides that he will avoid the problem of multicollinearity by regressing Y on X1 alone. Comment on this strategy.

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Answer to Question 1

C

Answer to Question 2

If Y is, in fact, strongly influenced by X2, dropping it from the regression equation could lead to serious specification bias. Instead of dropping the variable, it is preferable to acknowledge that, while the group as a whole is clearly influential, the data do not contain information to allow the disentangling of the separate effects of each of the explanatory variables with some degree of precision.