Refer to the Simultaneous Equations Model Above

question 16

Multiple Choice

Refer to the simultaneous equations model above. The reduced form error from the reduced form equation for K₂ will be a:

• A)quadratic function of u₁ and u₂, and correlated with z₁ and z₂.
• B)quadratic function of u₁ and u₂, and uncorrelated with z₁ and z₂.
• C)linear function of u₁ and u₂, and correlated with z₁ and z₂.
• D)linear function of u₁ and u₂, and uncorrelated with z₁ and z₂.

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