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

question 13

Multiple Choice

Consider the following simple regression model y=β₀+ β₁x₁+ u.Suppose z is an instrument for x. Which of the following statements is true?

• A)The condition Cov(z,u)= 0 can be tested statistically.
• B)The condition Cov(z,x)≠ 0 cannot be tested statistically.
• C)The instrumental variables estimator is always biased if Cov(x,u)≠0.
• D)The ordinary least squares estimator is unbiased if Cov(x,u)≠0.

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