All of the Following Conditions Are Necessary for an Instrumental

question 19

Multiple Choice

All of the following conditions are necessary for an instrumental variable Z to be a valid instrument for X in the regression: Y_i = β₀ + β₁X_i + U_i except for which condition?

• A) Cov(X_i, Z_i) ≠ 0
• B) Cov(Z_i, U_i) = 0
• C) Cov(X_i, Y_i) ≠ 0
• D) None of these choices are correct.

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Definitions:

Modal Class

The class interval in a frequency distribution that has the highest frequency, representing the most common value or range of values.

Positively Skewed

A distribution characterized by a long tail to the right side, indicating that a majority of the data points are concentrated to the left of the mean.

Skewed

Describes a distribution that is asymmetrical, where data points cluster more on one side than the other, often leading to a longer tail on one side of the peak.

Mean

To find the average value of a group of numbers, one adds together all the numbers and divides by how many numbers there are.