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Probelm:
(a) Differentiate between homoscedasticity and heteroscedasticity.
(b) Outline the reasons why the variances of disturbance term may vary.
(c) Given the 3 observations (1,4) , (2,6) and (3,7), with the true model being
Y = β1 + β2 X + u, solve the fitted line.
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In a simple economy, people consume only 2 goods, food and clothing. The market basket of goods used to compute the CPI has 50 units of food and 10 units of clothing.
(a) Estimate how much more or less workers on average earn when they work for government as opposed to private sector, holding their characteristics constant. Interpret the finding
what are the test for heteroscedasticity?
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