Answer: 2.07

## Explanation When we have a total of k "regressors" (including a constant) and n observations, the t-test statistic will follow a t-distribution with **n - k** degrees of freedom. ### Given: - n = 25 observations - k = 3 regressors (β₁, β₂, β₃) - Degrees of freedom = n - k = 25 - 3 = 22 ### Test Details: - This is a two-tailed test - Significance level = 5% - Each tail has 2.5% of the distribution - We need the critical value for t_{0.025, 22} ### Critical Value: Looking up the t-distribution table with 22 degrees of freedom and 2.5% in each tail gives us a critical value of **2.07**. ### Key Points: - The fact that observations are quarterly is irrelevant for the calculation - When testing a hypothesis about a single coefficient in a model with multiple regressors, we use a t-test - The t-test is NOT suitable for testing hypotheses that involve more than one parameter (those require F-tests) - The correct critical value is 2.07, which corresponds to option C

Author: Tanishq Prabhu