MEcon Master of Economics Econometrics and Research Methods 2

Question 1

A Type I error in hypothesis testing is:

Accepted Answer

Rejecting a true null hypothesis

Answer

A Type I error (false positive) occurs when the null hypothesis is actually true but the test leads you to reject it; its probability is controlled by the significance level α.

Question 2

The p-value in hypothesis testing represents:

Accepted Answer

The probability of observing results at least as extreme as the data if the null hypothesis is true

Answer

The p-value is a conditional probability — how likely the observed (or more extreme) data would be if H₀ were true — not the probability that H₀ itself is true.

Question 3

Multicollinearity in a regression refers to:

Accepted Answer

High correlation among two or more independent variables

Answer

Multicollinearity makes it difficult to isolate the individual effect of each correlated regressor, inflating standard errors and making coefficient estimates unstable.

Question 4

A unit root in a time series indicates that the series is:

Accepted Answer

Non-stationary with shocks having permanent effects

Answer

A unit root (random walk component) means the series does not return to a fixed mean — shocks permanently alter its level, making standard regression inference invalid.

Question 5

The R-squared statistic in regression measures:

Accepted Answer

The proportion of variance in Y explained by the model

Answer

R² indicates goodness of fit — the share of total variation in the dependent variable accounted for by the regressors — but high R² does not imply causality.

MEcon Master of Economics Practice Test

MEcon Master of Economics Practice Test

MEcon Master of Economics Econometrics and Research Methods 2