The Distinction Between Endogenous and Exogenous Variables Is

question 12

Multiple Choice

The distinction between endogenous and exogenous variables is

• A)that exogenous variables are determined inside the model and endogenous variables are determined outside the model.
• B)dependent on the sample size: for n > 100, endogenous variables become exogenous.
• C)depends on the distribution of the variables: when they are normally distributed, they are exogenous, otherwise they are endogenous.
• D)whether or not the variables are correlated with the error term.

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Definitions:

Financial Statements

Detailed records that outline the financial activities and condition of a business, organization, or individual, including the balance sheet, income statement, and cash flow statement.

Stock Market

A marketplace where shares of public companies are bought and sold, affecting company capital and investor wealth.

Additional Paid-In Capital

The amount of money investors have paid for shares above the nominal value, reflecting the excess paid over the stated par value of the shares.

Retained Earnings

The portion of net income that is retained by a company rather than distributed to its shareholders as dividends, often used for reinvestment.