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Hypothesis testing: Two variable model

  • How do we know whether the values of b0 and b1 that we have found are actually meaningful?
  • It is actually possible that our sample was a random sample and it has given us a totally wrong regression line?
  • We do know a lot about the sample error term “e” but what do we know about the error terms “u” of the Population Regression Function?
  • How do we proceed from here?

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