Chapter 13 - Linear Regression and Correlation

Chapter 13
Linear Regression and Correlation
1- A scatter diagram is a graph that portrays the correlation between a dependent variable and an
independent variable.
2- An economist is interested in predicting the unemployment rate based on gross domestic product.
Since the economist is interested in predicting unemployment, the independent variable is gross
domestic product.
3- The two variables in a correlation analysis are called the dependent and determination variables.
4- Correlation analysis is a statistical technique used to measure the strength of the relationship
between two variables.
5- The coefficient of correlation, r, is often referred to as Spearman's rho.
6- The coefficient of correlation r is often referred to as the Pearson product-moment correlation
coefficient.
7- A correlation coefficient equal to -1 or +1 indicates perfect correlation.
8- The strength of the correlation between two variables depends on the sign of the coefficient of
correlation.
9- A coefficient of correlation, r, close to 0 (say, 0.08) shows that the relationship between two
variables is quite weak.
10- Correlation coefficients of -0.91 and +0.91 represent relationships between two variables that
have equal strength but different directions.
11- A coefficient of correlation of -0.96 indicates a very weak negative correlation.
12- The coefficient of determination is the proportion of total variation in Y that is explained by X.
13- The coefficient of determination is the square root of the coefficient of correlation.
14- If the coefficient of correlation is -0.90, the coefficient of determination is -0.81.
15- If the coefficient of correlation is -0.50, the coefficient of determination is +0.25.
16- If the coefficient of correlation is 0.68, the coefficient of determination is 0.4624.
17- The correlation coefficient is the proportion of total variation in Y that is explained by X.
18- The coefficient of determination is the proportion of total variation in X that is explained by Y.
19- Pearson's product-moment correlation coefficient, r, requires that the data be interval or ratio
scaled, such as incomes and weights.
20- The standard error of estimate measures the accuracy of a prediction.
21- Pearson's coefficient of correlation can be used if the data is nominally scaled.
22- The coefficient of determination is equal to or greater than zero.
23- If the coefficient of determination is expressed as a percent, its value is between 0% and 100%.
24- A t test is used to test the significance of the coefficient of correlation.
25- To test the significance of Pearson's r, we use the standard normal z distribution.
26- When testing the strength of the relationship between two variables, the null hypothesis is:

27- When testing the strength of the relationship between two variables, the alternate hypothesis is:

28- One assumption underlying linear regression is that the Y values are statistically dependent. This
means that in selecting a sample, the Y values chosen, for a particular X value, depend on the Y
values for any other X value.

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29- The technique used to measure the strength of the relationship between two variables using the
coefficient of correlation and the coefficient of determination is called regression analysis.
30- The least squares principle is used to determine the best-fitting line.
31- The least squares technique minimizes the sum of the squares of the vertical distances between the
actual Y values and the predicted values of Y.
32- The values of a and b in the regression equation are called the regression coefficients.
33- One assumption underlying linear regression is that for each value of X there is a group of Y
values that is normally distributed.
34- In order to visualize the regression equation line, we can draw a scatter diagram.
35- A regression equation is a mathematical equation that defines the relationship between two
variables.
36- The regression equation is used to estimate a value of the dependent variable Y based on a selected
value of the independent variable X.
37- In regression analysis, the predicted value of rarely agrees exactly with the actual Y value, i.e.,
we expect some prediction error.
38- Trying to predict weekly sales with a standard error of estimate of $1,955, we would conclude that
68 percent of the predictions would not be off more than $1,955, 95 percent would not be off by
more $3,910, and 99.7 percent would not be off by more than $5,865.
39- The standard error of estimate is used to construct confidence intervals when the sample size is
large and the scatter about the regression line is somewhat normally distributed.
40- A confidence interval can be determined for the mean value of Y for a given value of X.
41- A confidence interval can be determined for the mean value of X for a given value of Y.
42- The smaller the samples, the smaller the standard error of estimate.
43- Explained variation equals total variation minus unexplained variation.
44- In regression analysis, there is no difference in the width of a confidence interval and the width of
a predictor interval.
45- A confidence interval is narrower than a prediction interval because a confidence interval
estimates a mean Y instead of an individual Y for a given X.
46- The least squares method assumes the relationship between the dependent and independent
variables is linear.
47- When analyzing data with regression, a transformation is necessary when the relationship between
the dependent and independent variables is linear.
48- When analyzing a curvilinear relationship between dependent and independent variables, a
transformation of the data is necessary.
49- A mathematical transformation can be used to change a curvilinear relationship between two
variables to a linear relationship.

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Multiple Choice Questions

50. What is the chart called when the paired data (the dependent and independent variables) are
plotted?
A. Scatter diagram
B. Bar chart
C. Pie chart
D. Histogram

51. What is the variable used to predict the value of another called?
A. Independent variable
B. Dependent variable
C. Correlation variable
D. Variable of determination

52. Which of the following statements regarding the coefficient of correlation is true?
A. It ranges from -1.0 to +1.0 inclusive
B. It measures the strength of the relationship between two variables
C. A value of 0.00 indicates two variables are not related
D. All of these

53. What does a coefficient of correlation of 0.70 infer?

A. Almost no correlation because 0.70 is close to 1.0
B. 70% of the variation in one variable is explained by the other
C. Coefficient of determination is 0.49
D. Coefficient of nondetermination is 0.30

54. What is the range of values for a coefficient of correlation?

A. 0 to +1.0
B. -3 to +3 inclusive
C. -1.0 to +1.0 inclusive
D. Unlimited range

55. The Pearson product-moment correlation coefficient, r, requires that variables are measured
with:
A. An interval scale
B. A ratio scale
C. An ordinal scale
D. A nominal
E. Either A or B.

56. If the correlation between two variables is close to one, the association is
A. strong.
B. moderate.
C. weak.
D. none.

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57. If the correlation coefficient between two variables equals zero, what can be said of the
variables X and Y?
A. Not related
B. Dependent on each other
C. Highly related
D. All of these are correct

58. What can we conclude if the coefficient of determination is 0.94?

A. Strength of relationship is 0.94
B. Direction of relationship is positive
C. 94% of total variation of one variable is explained by variation in the other variable.
D. A and B are correct

59. If r = 0.65, what does the coefficient of determination equal?

A. 0.194
B. 0.423
C. 0.577
D. 0.806

60. What does the coefficient of determination equal if r = 0.89?

A. 0.94
B. 0.89
C. 0.79
D. 0.06

61. Which value of r indicates a stronger correlation than 0.40?

A. -0.30
B. -0.50
C. +0.38
D. 0

62. What is the range of values for the coefficient of determination?

A. -1 to +1 inclusive
B. -100% to +100% inclusive
C. -100% to 0% inclusive
D. 0% to 100% inclusive

63. If we reject the null hypothesis that tests a population correlation coefficient, what can we
conclude about the correlation in the population?
A. It is zero
B. It could be zero
C. It is not zero
D. It equals the computed sample correlation

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64. A hypothesis test is conducted at the .05 level of significance to test whether or not the
population correlation is zero. If the sample consists of 25 observations and the correlation
coefficient is 0.60, what is the computed value of the test statistic?
A. 1.96
B. 2.07
C. 2.94
D. 3.60

65. In the regression equation, what does the letter "a" represent?
A. Y intercept
B. Slope of the line
C. Any value of the independent variable that is selected
D. None of these

66. In the regression equation, what does the letter "b" represent?
A. Y intercept
B. Slope of the line
C. Any value of the independent variable that is selected
D. Value of Y when X = 0

67. Given the least squares regression equation, = 1202 + 1,133X, when X = 3, what does
equal?
A. 5,734
B. 8,000
C. 4,601
D. 4,050

68. What is the general form of the regression equation?

A. = ab
B. = a + bX
C. = a - bX
D. = abX

69. Which of the following are true assumptions underlying linear regression: 1) for each value of
X, there is a group of Y values which is normally distributed; 2) the means of these normal
distributions of Y values all lie on the straight line of regression; and/or 3) the standard deviations
of these normal distributions are equal?
A. Only (1) and (2)
B. Only (1) and (3)
C. Only (2) and (3)
D. All of them

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70. Based on the regression equation, we can

A. predict the value of the dependent variable given a value of the independent variable.
B. predict the value of the independent variable given a value of the dependent variable.
C. measure the association between two variables.
D. all of these.

71. Which of the following is true about the standard error of estimate?
A. It is a measure of the accuracy of the prediction
B. It is based on squared vertical deviations between Y and
C. It cannot be negative
D. All of these

72. If all the plots on a scatter diagram lie on a straight line, what is the standard error of
estimate?
A. -1
B. +1
C. 0
D. Infinity

73. In the least squares equation, = 10 + 20X the value of 20 indicates

A. the Y intercept.
B. for each unit increase in X, Y increases by 20.
C. for each unit increase in Y, X increases by 20.
D. none of these.

74. In the equation = a + bX, what is ?

A. Slope of the line
B. Y intercept
C. Predicted value of Y, given a specific X value
D. Value of Y when X = 0

75. Assume the least squares equation is = 10 + 20X. What does the value of 10 in the equation
indicate?
A. Y intercept
B. For each unit increased in Y, X increases by 10
C. For each unit increased in X, Y increases by 10
D. None of these

76. What is the variable used to predict another variable called?

A. Independent variable
B. Dependent variable
C. Important variable
D. Causal variable

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77. In regression, the difference between the confidence interval and prediction interval formulas
is
A. the prediction interval is the square root of the confidence interval.
B. the addition of "1" to the quantity under the radical sign.
C. the prediction interval uses and the confidence interval uses r.
D. no difference.

78. Which of the following is NOT a difference between a confidence interval and a prediction
interval?
A. Addition of "1" under the radical for the prediction interval.
B. Confidence interval uses the standard error of estimate and the prediction interval does not.
C. Prediction interval refers to a specific case.
D. Confidence interval is narrower than the prediction interval.

79. When comparing the 95% confidence and prediction intervals for a given regression analysis,
A. the confidence interval is wider than a prediction interval
B. the confidence interval is narrower than a prediction interval
C. there is no difference between confidence and prediction intervals
D. none of these

80. In regression analysis, a transformation is used when

A. the confidence interval is wider than a prediction interval
B. two variables are not independent
C. the relationship between dependent and independent variables is not linear
D. the correlation is near zero

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