The First-Stage in an Instrumental Variable Approach to Control for Measurement

question 9

Multiple Choice

The first-stage in an instrumental variable approach to control for measurement error in an independent variable is

• A)regressing the mis-measured variable on only the exogenous variables in the original regression equation and using those estimates to calculate predicted values of the mis-measured variable.
• B)regressing the mis-measured variable on only the alternative value of the mis-measured variable.
• C)estimating the original population regression model with the predicted values of the mis-measured variable substituted for the observed values of the endogenous variable.
• D)regressing the mis-measured variable on both the alternative measure of the mis-measured variable and all of the remaining exogenous variables and using those estimates to calculate predicted values of the mis-measured variable.

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Definitions:

Net Loss

When expenses total more than revenue, the result is net loss.

Supplies on Hand

An accounting term representing the total value of the physical goods, materials, and supplies a company possesses that have not been used yet.

Net Cash Flow

The difference between a company's cash inflows and outflows within a specified period.

Investing Activities

Financial transactions related to the acquisition or disposal of long-term assets and investments, considered part of the cash flow statement.