A Microeconomist Wants to Determine How Corporate Sales Are Influenced

question 67

Multiple Choice

A microeconomist wants to determine how corporate sales are influenced by capital and wage spending by companies. She proceeds to randomly select 26 large corporations and record information in millions of dollars. A statistical analyst discovers that capital spending by corporations has a significant inverse relationship with wage spending. What should the microeconomist who developed this multiple regression model be particularly concerned with?

• A) randomness of error terms
• B) collinearity
• C) normality of residuals
• D) missing observations

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Definitions:

Relationship

The way in which two or more concepts, objects, or people are connected, or the state of being connected.

Statistically Significant

A measure indicating that the likelihood a result occurred by chance is low, often used in hypothesis testing.

Hypothesis

An initial theory put forward with restricted evidence to guide subsequent research.

Due to Chance

Describes scenarios or results that occur without any deliberate intention or causal relationship, attributed purely to randomness.