Consider the Multiple Regression Model with Two Regressors X₁ and X₂

question 53

Multiple Choice

Consider the multiple regression model with two regressors X₁ and X₂, where both variables are determinants of the dependent variable. You first regress Y on X₁ only and find no relationship. However when regressing Y on X₁ and X₂, the slope coefficient $\widehat { \beta 1 }$ changes by a large amount. This suggests that your first regression suffers from

• A)heteroskedasticity
• B)perfect multicollinearity
• C)omitted variable bias
• D)dummy variable trap

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Definitions:

Primacy Effect

The tendency to remember information presented at the beginning of a list better than information at the middle or end.

Memory Span

The number of items, typically words or numbers, that an individual can retain and recall in correct order in short-term memory.

Long-term Memory

The phase of the memory process that is capable of storing information for extended periods, often throughout one's life.

Short-term Memory

The segment of memory responsible for temporarily holding a small amount of information in an accessible state for a brief period.