If the Instruments Are Not Exogenous

question 7

Multiple Choice

If the instruments are not exogenous,

• A)you cannot perform the first stage of TSLS.
• B)then, in order to conduct proper inference, it is essential that you use heteroskedasticity-robust standard errors.
• C)your model becomes overidentified.
• D)then TSLS is inconsistent.

---

Definitions:

Accounts Receivable

Amounts due to a firm from its clients for goods or services already supplied but not yet paid for.

Dishonored Note

A promissory note that has not been paid by the maker at its maturity date.

Calculating Interest

The process of determining the cost of borrowing money or the gain from lending money, usually expressed as a percentage of the principal amount per period.

Note Receivable

A written promise that one party will pay a specific sum of money to another party at a future date.