pard.jhu.edu/wel ple China The New York Tim... Home - BBC News B Bloomberg Busine W GN, BB... TIME - Current &... Wikipedia, the fre... f Question Completion Status: QUESTION 1 Consider the following regression model: y = Bo + 31x1 + ... + BkXk + u, j = 0, 1, ..., k. Which of the following statements is correct? a, If xj is correlated with u for any reason, then x; is said to be an endogenous explanatory variable. An explanatory variable in a multiple regression model can be correlated with the error term because of an omitted O b. variable. O c. An explanatory variable in a multiple regression model can be correlated with the error term because of simultaneity. O d. All of the above. QUESTION 2 Consider the following regression model: y = Bo + 31x1 + 32x2 + u (1), where the explanatory variable x, is suspected of being endogenous (correlated with u) and the explanatory variable X2 is exogenous (uncorrelated with u). Further consider the following regression model: X1 = Tto + Itz + 12x2 + v (2), where m1 # 0 and Cov(z,u) - 0. Which of the following statements is correct? O a. We call z an instrumental variable (IV) for x1. O b. We call equation (1) the reduced form equation. O c. We call equation (2) the structural equation. O d. All of the above. Click Save