The following equations represent a simultaneous equations model:
K1= 
1K2+ 
1z1 + u1
K2= 2K1+ 2z2 + u2
OLS will suffer from simultaneity bias if:
A. u1 is correlated with z1.
B. z1 is correlated with z2.
C. K2 is correlated with u1.
D. K1 is correlated with u1.
Answer: C
You might also like to view...
A perfectly competitive firm's marginal cost exceeds its marginal revenue at its current output. To increase its profit, the firm will
A) lower its price. B) raise its price. C) decrease its output. D) increase its output.
Susan Greenberg, who works in a typewriter factory, becomes unemployed because people start buying personal computers instead of typewriters. Susan can best be described as:
a. frictionally unemployed. b. structurally unemployed. c. cyclically unemployed. d. not part of the labor force. e. a discouraged worker.
If crowding out exists, the expansionary effect of government spending will be:
a. smaller than intended. b. negative. c. infinite. d. larger than intended. e. zero.
Private property was argued to be inappropriate by Marxists due to its distribution from those "who have" to those "who will have" in a fashion creating a class to itself
Indicate whether the statement is true or false