All of the following conditions are necessary for an instrumental variable Z to be a valid instrument for X in the regression: Yi = ?0 + ?1Xi + Ui except for which condition?
A. Cov(Xi, Zi) ? 0
B. Cov(Xi, Yi) ? 0
C. Cov(Zi, Ui) = 0
D. None of these choices are correct.
Answer: B
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