Consider the Following Simple Regression Model: Y = β₀+ β₁x₁

question 2

Multiple Choice

Consider the following simple regression model: y = β₀+ β₁x₁+ u.Suppose z is an instrument for x.Which of the following conditions denotes instrument exogeneity?

• A)Cov(z,u)> 0
• B)Cov(z,x)> 0
• C)Cov(z,u)= 0
• D)Cov(z,x)= 0

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