Given the Following Econometric Model, Wage = β₀+ β₁educ

question 8

Multiple Choice

Given the following econometric model, wage = β₀+ β₁educ + u, can we eliminate the error term u entirely?

• A)Yes, by including other observable factors, such as experience, that can also influence wage.​
• B)Yes, by ensuring that everyone reports wage accurately and truthfully.
• C)No, because education is not always reported accurately.
• D)No, because many factors affect wage, that we cannot even list, let alone observe.

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Definitions:

Withdrawals

The act of taking money out from a bank account or investment.

Retirement Fund

A financial arrangement designed to replace employment income upon retirement, often consisting of contributions from employers, employees, or both.

Compounded Monthly

Involves calculating interest on the initial principal and the accumulated interest from previous months, applied monthly.

Monthly Payments

Regular payments made once a month as part of a financial agreement, such as a loan or mortgage.