Why Is It the Case That an Instrumental Variable Is

question 14

Multiple Choice

Why is it the case that an instrumental variable is not found directly in the determining function?

• A) If an instrument is exogenous, then it has no effect on the outcome beyond those already in the determining function.
• B) If an instrument is relevant, then it has no effect on the outcome beyond those already in the determining function.
• C) If an instrument is exogenous, then it has an effect on the outcome just not a statistically significant one.
• D) If an instrument is relevant, then it has an effect on the outcome just not a statistically significant one.

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Definitions:

Price of Beer

The cost at which beer is sold, influenced by factors such as production costs, taxes, and market demand.

Price of Pizza

The cost at which pizza is sold or purchased, which can vary based on ingredients, size, and location.

Jon's Budget

A specific example referring to the budget allocated or controlled by an individual named Jon.

Prices of Products

The cost at which goods or services are offered for sale to consumers.