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You Are Interested in Determining the Factors That Determine the Wealth

Question 43

Multiple Choice

You are interested in determining the factors that determine the wealth of a person and assume that the age of a person may have a non-linear effect on wealth.You run the following regression: Y = β0 + β1X1 + β2X2 + β3

You are interested in determining the factors that determine the wealth of a person and assume that the age of a person may have a non-linear effect on wealth.You run the following regression: Y = β<sub>0</sub> + β<sub>1</sub>X<sub>1</sub> + β<sub>2</sub>X<sub>2</sub> + β<sub>3</sub> <sub> </sub> + β<sub>4</sub>X<sub>3</sub> + ε where Y is the total wealth and X<sub>2</sub><sub> </sub>is the person's age.What would be your H<sub>0</sub><sub> </sub>regarding β<sub>2</sub> and β<sub>3</sub>? A) β<sub>2</sub> > 0 and β<sub>3</sub> > 0 B) β<sub>2</sub><sub> </sub>< 0 and β<sub>3</sub> < 0 C) β<sub>2</sub> > 0 and β<sub>3</sub> < 0 D) β<sub>2</sub> < 0 and β<sub>3</sub> > 0
+ β4X3 + ε where Y is the total wealth and X2 is the person's age.What would be your H0 regarding β2 and β3?


A) β2 > 0 and β3 > 0
B) β2 < 0 and β3 < 0
C) β2 > 0 and β3 < 0
D) β2 < 0 and β3 > 0

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