The Extended Least Squares Assumptions in the Multiple Regression Model

question 30

Multiple Choice

The extended least squares assumptions in the multiple regression model include four assumptions from Chapter 6 (ui has conditional mean zero; (X_i,Y_i) , i = 1,…, n are i.i.d. draws from their joint distribution; X_i and u_i have nonzero finite fourth moments; there is no perfect multicollinearity) . In addition, there are two further assumptions, one of which is

• A)heteroskedasticity of the error term.
• B)serial correlation of the error term.
• C)homoskedasticity of the error term.
• D)invertibility of the matrix of regressors.

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Definitions:

Utility Function

A mathematical representation that captures the level of satisfaction or happiness that consumers derive from consuming goods and services.

Initial Endowment

The original distribution of resources, wealth, or abilities that individuals or groups possess in an economic model.

Pareto Optimal

A state of allocation of resources from which it is impossible to make any individual better off without making at least one individual worse off.

Utility Function

An economic model that describes how consumers rank different bundles of goods based on the levels of happiness or satisfaction they provide.