Multicollinearity Is Severe If the Largest Variance Inflation Factor (VIF)

question 19

Multiple Choice

Multicollinearity is severe if the largest variance inflation factor (VIF) is greater than ________.

• A) 100
• B) 5
• C) 10
• D) 1

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Definitions:

Open Market Operations

Activities undertaken by a central bank, such as the buying or selling of government securities, to control the money supply and interest rates.

Discount Rate

The interest rate charged by the Federal Reserve to depository institutions.

Federal Reserve

The Federal Reserve is the central bank of the United States, responsible for implementing the country's monetary policy, regulating banks, maintaining financial system stability, and providing financial services.

Monetary Growth

The increase in the money supply in an economy over time, which can influence inflation rates, interest rates, and economic growth.