Answer Questions 1-2 by using the following model:

GDP Growth Rate_t = + ₁USForeignAid_t + ₂USForeignAid_t-1 + u

Your data is from the African country Rwanda from 1990 to 2010, and youre interested in how foreign aid from the USA effected GDP growth rate in Rwanda.

1)If foreign aid packages are distributed over multiple years, then the amount of foreign aid provided in one year is correlated with the amount of foreign aid provided the following year. Given this, which of the assumptions for unbiasedness are violated:

(a)TS3

(b)TS2

(c)TS1

(d)None of the required assumptions are violated.

2)If foreign aid is often used for investments in which the return occurs after many years, which of the assumptions for unbiasedness are violated:

(a)TS3

(b)TS2

(c)TS1

(d)None of the required assumptions are violated