The Following Equations Represent a Simultaneous Equations Model: K₁ =

question 7

Multiple Choice

The following equations represent a simultaneous equations model: K₁ = ₁K₂ + ₁z₁ + u₁
K₂ = ₂K₁+ ₂z₂ + u₂
OLS will suffer from simultaneity bias if:

• A)u₁ is correlated with z₁.
• B)z₁ is correlated with z₂.
• C) K₂ is correlated with u₁.
• D) K₁ is correlated with u₁.

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Definitions:

Tax Avoidance

The legal use of tax laws to reduce one's tax burden through various means and financial arrangements.

Tax System Equity

The fairness of a tax system, assessed by how the tax burden is distributed among different groups in society.

Deadweight Losses

Economic inefficiencies that occur when the allocation of resources is not optimal, typically due to market imbalances or government interventions.

Tax

A compulsory financial charge or other type of levy imposed on a taxpayer by a governmental organization in order to fund government spending and various public expenditures.