Multicollinearity Is Caused By

question 9

Multiple Choice

Multicollinearity is caused by:

• A) high correlation among the X variables.
• B) a linear XY relation.
• C) a log-linear XY relation.
• D) high correlation between Y and at least one X variable.

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Definitions:

Economic Decisions

Choices made by individuals, firms, or governments regarding the allocation of resources to satisfy needs and wants.

Marginal Decision Maker

is an individual or entity that makes choices based on the additional cost or benefit of the next unit of consumption or production.

Comparative Advantage

The ability of an entity to produce a good or offer a service at a lower opportunity cost than others, leading to more efficient trade.

Opportunity Cost

The value of the next best alternative forgone as a result of making a decision to pursue a certain action.