One of the Sources of Error in the RMSFE in the AR(1)model

question 34

Multiple Choice

One of the sources of error in the RMSFE in the AR(1) model is

• A)the error in estimating the coefficients β0 and β1.
• B)due to measuring variables in logarithms.
• C)that the value of the explanatory variable is not known with certainty when making a forecast.
• D)the model only looks at the previous period's value of Y when the entire history should be taken into account.

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Definitions:

Edgeworth Box

A diagram used in microeconomics to show the distribution of resources and the optimality of trade-offs between two agents in an economy.

Pareto Efficient

A condition where resources are distributed in such a manner that improving the situation of one person necessitates the detriment of another.

Initial Endowment

Refers to the initial amount of money, assets, or resources that an individual, firm, or country possesses before entering into any trading or production activities.

Pareto Optimal

An arrangement of resource distribution that prevents the improvement of one individual's condition without adversely affecting another individual.