The Following Simple Model Is Used to Determine the Annual

question 16

Multiple Choice

The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education. Savings = The variable 'Edu' takes a value of 1 if the person is educated and the variable 'Inc' measures the income of the individual.
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Refer to the model above. The inclusion of another binary variable in this model that takes a value of 1 if a person is uneducated, will give rise to the problem of _____.

• A)omitted variable bias
• B)self-selection
• C)dummy variable trap
• D)heteroskedastcity

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Definitions:

Swing

A type of seat or platform suspended from above that allows an individual, typically a child, to move back and forth through the air.

Body Mass Index (BMI)

A numerical measurement calculated from a person's weight and height, used to assess whether they have a healthy body weight for their height.

85th Percentile

A statistical value indicating that 85% of a given population falls below this level, commonly used in various fields such as health, education, and traffic speed analysis.

Middle Childhood

The developmental stage that typically encompasses children from ages 6 to 12, characterized by significant growth in social, cognitive, and emotional areas.