15. Which of the following statements is TRUE regarding the basic assumptions of

Question

15. Which of the following statements is TRUE regarding the basic assumptions of the money demand regression model given above? a. E(uut-j) should be equal to zero for serial correlation to exist in the model. b. E(u)2 should be equal to a constant value over time for the errors to be homoscedastic. C. u, d. All statements are TRUE e. b and c statements are TRUE 16. The correlation coefficient is used to determine (a) the specified value the y-variable given a specific value the x-variable (b) the specified value the x-variable given a specific value the y-variable (c) the strength of the relationship between x and y variables (d) None of the above

Explanation / Answer

15. Option ‘ a ’ is correct.

Because error term in a money demand regression model is a random variable with a mean or expected value of zero.

16. Option ‘ C ‘ is correct.

Because it’s a measure of the linear correlation between two variables X & Y estimating a value between +1 & -1. Here 1 is total positive correlation, 0 is no correlation, and 1 is total negative correlation.

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