Refer to the Simultaneous Equations Model Above

question 16

Multiple Choice

Refer to the simultaneous equations model above. The reduced form error from the reduced form equation for K₂ will be a:

• A)quadratic function of u₁ and u₂, and correlated with z₁ and z₂.
• B)quadratic function of u₁ and u₂, and uncorrelated with z₁ and z₂.
• C)linear function of u₁ and u₂, and correlated with z₁ and z₂.
• D)linear function of u₁ and u₂, and uncorrelated with z₁ and z₂.

---

Definitions:

Invoice

A document issued by a seller to a buyer, detailing the products or services sold, their quantities, and the agreed prices for the transaction.

Payment

The transfer of money or goods in exchange for a product, service, or to fulfill a legal obligation.

Overhead Expenses

Represents the ongoing costs of operating a business that are not directly tied to the production of goods or services, such as rent, utilities, and administrative salaries.

Profit

The financial gain achieved when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.