The determining function that drives share of accepted job offers for a company is given by the following equation: AcceptedOfferst = ?0 + ?1StartingSalaryt + ?2EconomicClimatet + Ut, where the unit of observation is particular month (t). Suppose one wanted to use the national unemployment rate (unemploymentt) as a proxy for EconomicClimate. Which of the following describes a condition required to hold for this to be an adequate proxy variable?
A. EconomicClimate is correlated with StartingSalary
B. StartingSalary, EconomicClimate, and Unemployment rate to be uncorrelated with "other factors" (Ut)
C. ?2 > 0
D. ?2 < 0
Answer: B
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Fill in the blank(s) with correct word
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