In the Regression Model $Y _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { i } + \beta _ { 2 } D _ { i } + \beta _ { 3 } \left( X _ { i } \times D _ { i } \right) + u _ { i }$

question 2

Multiple Choice

In the regression model $Y _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { i } + \beta _ { 2 } D _ { i } + \beta _ { 3 } \left( X _ { i } \times D _ { i } \right) + u _ { i }$ where X is a continuous variable and D is a binary variable, $\beta _ { 3 }$

• A) indicates the slope of the regression when D=1 .
• B) has a standard error that is not normally distributed even in large samples since D is not a normally distributed variable.
• C) indicates the difference in the slopes of the two regressions.
• D) has no meaning since \(\left( X _ { i } \times D _ { i } \right) = 0 \text { when } D _ { i } = 0 \text {. }\)

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