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:

Monthly Payments

Regular payments made once a month as part of a financial agreement, such as a loan or mortgage.

Interest

The cost of borrowing money, typically expressed as a percentage of the amount borrowed.

Compounded Annually

Interest calculation method where the interest is calculated once a year and added to the principal sum, affecting the next year's interest calculation.

Quarterly Withdrawals

Periodic withdrawals from an investment or savings account that occur every three months.