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For two generic random variables Zi and Wi the Law of Iterated Expectations (LIE) says that: E[Wi] = Ez[E[W |Zi]] E[Zi] = Ew [E[Zi[W.]] You

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For two generic random variables Zi and Wi the Law of Iterated Expectations (LIE) says that: E[Wi] = Ez[E[W |Zi]] E[Zi] = Ew [E[Zi[W.]] You are given the following regression model: Yi = Bo + B1Xi + ui and you are told that EluilXi] = 0. a) Does Al hold? b) Show that E(ui) = 0. Interpret what it means. c Show that Cov(ui, Xi) = 0. Interpret what it means. d) Will the OLS estimator be a good estimator of 31? Explain

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