Why Is a Random Error Term Included in an Econometric

question 1

Multiple Choice

Why is a random error term included in an econometric model?

• A)because many economic models have not been well developed yet and need to allow for inaccuracies
• B)because some people are irrational
• C)because there is intrinsic uncertainty in any economic activity due to individual decision making
• D)because most estimating techniques are not well suited to work with a deterministic model.

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Definitions:

QAM

An acronym for "Quaque Ante Meridiem," a medical notation meaning every morning; also refers to Quadrature Amplitude Modulation, a technique used in digital communication.

Salve

An ointment.

Ointment

A semi-solid preparation usually containing medicinal substances, applied externally to protect, heal, or soothe the skin.

Prescription

A written order from a licensed healthcare provider that authorizes a patient to be issued with a specific medication or treatment.