When You Add State Fixed Effects to a Simple Regression

question 30

Multiple Choice

When you add state fixed effects to a simple regression model for U.S.states over a certain time period, and the regression R2 increases significantly, then it is safe to assume
That

• A)the included explanatory variables, other than the state fixed effects, are unimportant.
• B)state fixed effects account for a large amount of the variation in the data.
• C)the coefficients on the other included explanatory variables will not change.
• D)time fixed effects are unimportant.

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Definitions:

Approximately Normal

Describes a distribution that closely follows a normal distribution, with slight deviations.

Normal Populations

Populations that exhibit a bell-shaped distribution curve, characterized by symmetry around the mean and decreasing frequency as the distance from the mean increases.

Independent Samples

Refers to two or more groups of samples that are collected from distinct, non-overlapping populations, without any pairs or matched subjects.

Sampling Distribution

Distribution of probabilities associated with a particular statistic, originating from a random sample.