ECON 1000 Chapter : Graphs Used in Economics Models.doc

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17 Apr 2013

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Graphs are used in economic models to show the relationship between variables. The patterns to look for in graphs are the four cases in which. Variables have a maximum or a minimum. A relationship between two variables that move in the same direction is called a positive relationship or a direct relationship. A line that slopes upward shows a positive relationship. A relationship shown by a straight line is called a linear relationship. The three graphs on the next slide show positive relationships. A relationship between two variables that move in opposite directions is called a negative relationship or an inverse relationship. A line that slopes downward shows a negative relationship.

Related Questions

Please select the correct statement from the choices below.

	Two random variables with zero correlation tend to move in the opposite direction.
	Two random variables with positive correlation tend to move in the same diretion.
	Mean and variance are measured in the same units.
	Covariances lie between 0 and 1.

According to the Fama-French model

	beta is not a determinant of a stock's expected return.
	firm size and value are important factors in explaining the realized returns on publicly traded stock.
	most company stock have a beta equal.
	a stock's standard deviation is the only important factor determining its return.

One critique of the CAPM is that

	the market return is not calculable.
	all individual stock betas equal one so the model is irrelevant.
	the model's predictive power is questionable.
	you can't determine the riskless rate of return.

The following ratio represents a stock's __________.

Cov(ra,rm)Ï2m

	riskless rate of return
	beta
	standard deviation
	market price
	risk-adjusted return

The difference between the realized return and the expected return predicted from the CAPM is the ________

	Rf
	Î²
	Î±
	Ï2m

Economic Analysis Paper : Macroeconomic Variables

Your third analysis paper is about the macroeconomic variables affecting firm or industry performance. Using your company selection, complete the following Main Elements:

The company is Microsoft

Identify three to five macroeconomic variables that affect the demand for and/or supply of the products or services produced by your company or industry. For example, if you are analyzing a consumer product, such as television sets or computers, you might include consumer income, energy prices, wage rates, and interest rates.
Find historical data (three to five years) for these variables for one of the countries in which your company or industry has a major presence. Develop your own graphs and/or tables showing the data, and discuss how the variables have changed over the period you are examining. Do not copy and paste data from other websites, but use the available data to create your own table or graph.
Compare changes in the macroeconomic variables to changes in the company data you collected in Papers One and Two. What observations can you make about the effects of movements in macroeconomic variables on the company

ECON 3050

Q24. The coefficient of determination (r²) is calculated as 0.49, then the correlation coefficient:

Cannot be determined without the data

Should be - 0.70 or 0.70

Should be 0.

Neither of the above

Q25. A regression line is used for all of the following except one. Which one is not a valid use of a regression line?

To estimate the average value of Y at a specified value of X.

To predict the value of Y for an individual, given that individual's X-value.

To estimate the change in Y for a one-unit change in X.

To determine if a change in X causes a change in Y.

Q26. Which choice is not an appropriate description of YË in a regression equation?

Estimated response

Predicted response

Estimated average response

Observed response

Q27. Which of the following is the best way to determine whether or not there is a statistically significant linear relationship between two quantitative variables?

Compute a regression line from a sample and see if the sample slope is 0.

Compute the correlation coefficient and see if it is greater than 0.5 or less than â0.5.

Conduct a test of the null hypothesis that the population slope is 0.

Conduct a test of the null hypothesis that the population intercept is 0.

Q28. There is no relationship between variables unless the data points lie in a straight line.

True

False

Q29. The sample regression analysis

Is the same as the population regression line

Is used to estimate the population regression line

Shows the true relation between dependent and independent variables

None of the above.

Q30. In regression, a dependent variable is sometimes called a predictor variable.

True

False

Q31. In a linear regression equation of the form y = a + bx, the intercept shows

The amount that y changes when x changes by one unit

The amount that x changes when y changes by one unit

The value of y when x is zero

The value of x when y is zero.

Q32. In a linear regression equation of y = a + bx, the slope b shows

Y / b

X / b

Y / X

X / Y

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ECON 1000 Chapter : Graphs Used in Economics Models.doc

ECON 1000 Full Course Notes

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