The Classical Errors-In-Variables (CEV) Assumption Is That _____

question 23

Multiple Choice

The classical errors-in-variables (CEV) assumption is that _____.

• A)the error term in a regression model is correlated with all observed explanatory variables
• B)the error term in a regression model is uncorrelated with all observed explanatory variables
• C)the measurement error is correlated with the unobserved explanatory variable
• D)the measurement error is uncorrelated with the unobserved explanatory variable

---

Definitions:

Optimal Consumption Bundle

A combination of goods and services that maximizes a consumer's satisfaction or utility, given their income and the prices of goods and services.

Normal Good

A type of good for which demand increases as consumers' income increases, and vice versa.

Inferior Good

A category of product whose demand falls when the income levels of buyers rise, in opposition to normal goods.

Consumer Choice

The range of preferences and decisions consumers face regarding the use of products, influenced by income, price, tastes, and preferences.