The Determining Function That Drives Share of Accepted Job Offers

question 26

Multiple Choice

The determining function that drives share of accepted job offers for a company is given by the following equation: AcceptedOffers_t = α₀ + α₁StartingSalary_t + α₂EconomicClimate_t + U_t, where the unit of observation is particular month (t) . Suppose one wanted to use the national unemployment rate (unemployment_t) as a proxy for EconomicClimate. Which of the following describes a condition required to hold for this to be an adequate proxy variable?

• A) α₂ < 0
• B) StartingSalary, EconomicClimate, and Unemployment rate to be uncorrelated with "other factors" (U_t)
• C) α₂ > 0
• D) EconomicClimate is correlated with StartingSalary

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