firat

q1:
what happens if the standard errors were too low? You would have higher T-stats, and choose you to accept your null hypotheses more.

if the std. errors were too high -> lower T-Stats and you would end up rejecting your null hypotheses.

std. error is distance between the predicted value and the actual value of dependent variable. in a conditional heterosked. case - values could be high or low, more often than not, it would be high.

q2: The regression equation is only a model, with which you are trying to predict things. Just because you removed a variable - errors are not going to totally disappear. They would at best reduce, and help you make a better prediction than before.

CP