Suppose You're Running a Multiple Regression of Home Prices on Two

question 16

Multiple Choice

Suppose you're running a multiple regression of Home Prices on two treatment variables, City, which is a binary variable for whether or not the home is located in a city or not, and Finished Basement, which is a binary variable for whether or not the home has a finished basement. If you solve for the multiple regression using the moment conditions which condition must hold?

• A) The sum of squared residuals must equal zero.
• B) The sum of absolute residuals must equal zero.
• C) The sum of the residuals for the observations with Finished Basements (=1) must be zero.
• D) The correlation between the residuals and Home Prices must be equal to zero.

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Definitions:

Aggregate Demand

All-encompassing demand for goods and services in an economy, analyzed at one price level throughout an allotted time frame.

Aggregate Supply

The entirety of goods and services that economic entities intend to market within a particular period in an economic environment.

Expected Price Level

The anticipated average of prices for all goods and services in an economy over a future period.

Labor Contracts

Agreements between employers and employees or unions that define terms of employment, salaries, benefits, and working conditions.