Suppose We Are Interested in the Effect of Gender on Income

question 2

Multiple Choice

Suppose we are interested in the effect of gender on income and estimate a model that includes a dummy variable for men. If we instead estimate a model that includes a dummy variable for women,

• A) The coefficient on the dummy variables will be exactly the same.
• B) The coefficient on the dummy variables will differ across models, but the estimated difference of means between men and women will not change.
• C) The fit of the model will change.
• D) We will get different answers when testing a null hypothesis that there is no gender effect.

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Definitions:

Par Value

The face value of a bond or stock as stated on the certificate or charter, often used for legal capital or accounting purposes.

Cash

A form of currency that includes coins and paper notes, which is used as a medium of exchange for goods and services.

Shares

Units of ownership interest in a corporation or financial asset, which provide for an equal distribution in any profits, if any are declared, in the form of dividends.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing owners' claims against the company's assets.