Consider the Following Simple Regression Model Y=β₀ + β₁x₁

question 4

Multiple Choice

Consider the following simple regression model y=β₀ + β₁x₁ + u.The variable z is a poor instrument for x if _____.

• A)there is a high correlation between z and x
• B)there is a low correlation between z and x
• C)there is a high correlation between z and u
• D)there is a low correlation between z and u

---

Definitions:

Demand Falls

A situation where there is a decrease in the quantity of a product or service that consumers are willing and able to purchase at a given price.

Equilibrium Quantity

At the market equilibrium price, the amount of goods or services offered matches the amount requested.

Supply Falls

A condition in which the quantity of a product or service available in the market decreases, potentially leading to higher prices.

Surplus

The condition that occurs when supply exceeds demand, often resulting in a decrease in prices.