Which One of the Following Is NOT an Assumption of the Classical

question 24

Multiple Choice

Which one of the following is NOT an assumption of the classical linear regression model?

• A) The explanatory variables are uncorrelated with the error terms.
• B) The disturbance terms have zero mean
• C) The dependent variable is not correlated with the disturbance terms
• D) The disturbance terms are independent of one another.

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Definitions:

Consumption

The total amount of goods and services consumed by households and individuals in an economy.

Consumption Function

An economic formula that depicts the relationship between total consumption and gross national income, indicating how income affects spending.

Future Expectations

Anticipations or predictions about the economy or financial markets based on current events or trends that can influence consumer and investor behaviors.

Market Interest Rate

The prevailing rate at which borrowers can obtain loans and savers can earn on their investments in the open market.