When You Have an Omitted Variable Problem,the Assumption That E(ui

question 38

Multiple Choice

When you have an omitted variable problem,the assumption that E(ui Xi) = 0 is violated.This implies that

• A)the sum of the residuals is no longer zero.
• B)there is another estimator called weighted least squares,which is BLUE.
• C)the sum of the residuals times any of the explanatory variables is no longer zero.
• D)the OLS estimator is no longer consistent.

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Definitions:

AASB 141

Refers to the Australian Accounting Standard on Agriculture, guiding on the accounting for agricultural activity including the recognition and measuring of biological assets.

Biological Assets

Living plants or animals that are used in agricultural activities from which agricultural produce is harvested, accounted for under specific accounting standards.

Fair Value

An estimate of the price at which an asset or liability could be exchanged in a current transaction between willing parties.

AASB 141

An Australian Accounting Standards Board standard that concerns agriculture, detailing the accounting for agricultural activity including the transformation of biological assets (living plants and animals) into agricultural produce.