The Biggest Difference Between Fixed-Effects and Random-Effects Models Is That

question 17

Multiple Choice

The biggest difference between fixed-effects and random-effects models is that

• A)fixed effects models assume that the unobserved heteroskedasticity is uncorrelated with the independent variables.
• B)random effects models do not completely remove the time-invariant component of the error term.
• C)fixed effects models completely remove the time-variant component of the error term.
• D)random effects models are random while fixed-effects models are fixed.

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Definitions:

Payroll Tax Expense

Taxes that are levied on an employer based on the wages and salaries paid to employees.

FICA-OASDI

Refers to the Social Security portion of the Federal Insurance Contributions Act tax, funding Social Security retirement, disability, and survivor benefits.

FICA-OASDI

The Federal Insurance Contributions Act tax for Old-Age, Survivors, and Disability Insurance, which funds Social Security.

FUTA

The Federal Unemployment Tax Act, which imposes a payroll tax on businesses, used to fund state workforce agencies.