If an Explanatory Variable Is Strictly Exogenous It Implies That

question 6

Multiple Choice

If an explanatory variable is strictly exogenous it implies that:

• A)changes in the lag of the variable does not affect future values of the dependent variable.
• B)the variable is correlated with the error term in all future time periods.
• C)the variable cannot react to what has happened to the dependent variable in the past.
• D)the conditional mean of the error term given the variable is zero.

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Definitions:

Direct Labour Hours

Direct labour hours refer to the amount of time spent by workers directly involved in the manufacturing process of a product or service.

Cost Driver

A factor that causes or relates to a change in the cost of an activity or product.

Activity-Based Budgeting (ABB)

A budgeting approach that determines the cost of activities necessary for producing a product or service, aiming to improve cost efficiency.

Activity-Based Costing (ABC)

A costing methodology that assigns overhead and indirect costs to specific activities, thereby providing more accurate cost information.