Answer Happy

QUESTION 1 Consider the following regression model, Y;= B1 + B2Xi2+...+Bkxik+e; where E[e;|x;= 0 and Var(e;|x;) depends on the value of Xi , i.e., Var(e;|x;) + 02. Choose the correct statement. a. To get around the problem, we often assume that e; is normally distributed. b. To fix the problem, we need to have an instrumental variable. OC. This problem implies that errors are correlated with one of (Xi2, ..., Xik). d. If we assume Var(ej|x;) = 02, the confidence interval is not valid. O e. None of the above is correct. QUESTION 2 a. The OLS estimators of the coefficients in multiple regression will have omitted variable bias: only if an omitted determinant of y, is a continuous variable. O b.if an omitted varible is correlated with at least one of the regressors, even though it is not a determinannt of the dependent variable. O c. only if the omitted variable is not normally distributed. d. · if an omitted determinant of Y; is correlated with at least one of the regressors. O e. if the degree of freedom is less than 50.