5. Suppose you are interested in examining the effects that exercise has on an i

Question

5. Suppose you are interested in examining the effects that exercise has on an individual's weight using the following model: weight-Bo + ,exercise + 2age + u Where Weight is a person's mass in kilograms, age is a person's age in years, exercise is the average number of hours a person spends at the gym each week. A fellow student is concerned that the estimated coefficient on exercise may not capture the ceteris paribus effect of exercise on a person's weight and suggests adding an income variable to the model. Is the student's concern valid? Why or why not? If you believe Bi is a. biased, provide the direction of bias. b. Using a random sample of men between ages 18-60 you estimate the model. This results in = 0.34, what is the interpretation of this number. Remember to specify the appropriate units. Suppose you wish to measure the person's weight in pounds instead. Using 0.34 as the original value for B2 when weight is measured in kilograms, what is the new coefficient on age when measuring body mass in pounds? (One kilogram is approximately equal to 2.2 pounds and one pound is approximately equal to 0.45 kilograms.) c. d. What do you expect the sign of to be? There is no one correct answer, but you must use "theory" to back up your answer.

Explanation / Answer

a)

Ideally looking income of an individual is not a variable which might have an effect on the weight of a person. Age and excercise on the other hand would have an impact on the weight of a person as it can imply that a person would be more fit if he is less in age and does more exercise. Hence, student's concern is not valid.

b)

This means that keeping all other factors constant, the weight of a person would go up by 0.34 kilograms when the age increases by 1.

c)

0.34*2.2=0.748

d)

The sign for B1 should be (-) negative because the more excercise the person would put in, he would lose more weight. Hence, as x1 increases, y should decrease.

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