Which of the Following Violates the Assumptions of Regression Analysis

question 32

Multiple Choice

Which of the following violates the assumptions of regression analysis?

• A) The error term is normally distributed.
• B) The error term has a zero mean.
• C) The error term is correlated with an explanatory variable.
• D) The error term has a constant variance.

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Definitions:

Keynesian Model

An economic theory proposed by John Maynard Keynes, suggesting that aggregate demand is the primary driving force in the economy, and advocating for government intervention to manage economic fluctuations.

Classical Theory

An economic theory that emphasizes the importance of free markets, competition, and the belief that markets, through the forces of supply and demand, will naturally regulate the economy.

Employment

The condition of having a paid job; the total number of people currently employed in the economy.

Interest Rate Effect

The impact that changes in the interest rate have on consumer spending and investment due to the cost of borrowing money.