When the Error Terms Are Correlated Across Observations,one Way to Address

question 45

Multiple Choice

When the error terms are correlated across observations,one way to address the resulting econometric problem is to:

• A) use weighted least squares.
• B) use first differences rather than levels of the variables.
• C) gather more data.
• D) transform the independent variable.
• E) eliminate covarying variables.

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Definitions:

Double Taxation

The imposition of taxes on the same income, asset, or financial transaction at two different levels, such as corporate income and then again as shareholder dividends.

Corporate Form

A legal structure for organizations that allows them to operate as separate legal entities from their owners, with the ability to hold assets, sue, and be sued.

Accounting

Accounting is the systematic practice, work, or process of communicating and recording financial information for a business or individual.

Finance

The management of large amounts of money, especially by governments or large companies, including the processes of investing, borrowing, lending, budgeting, saving, and forecasting.