Question
In a multiple linear regression model, the presence of
perfect multicollinearity among the explanatory variables will primarily result in which of the following issues?Solution
Solution: · Multicollinearity refers to a high linear correlation among two or more independent variables. · Perfect Multicollinearity means one explanatory variable is an exact linear function of one or more others (e.g., X2=2X1+5). · Mathematical Result: OLS requires calculating (X′X)−1, the inverse of the matrix of sums of squares and cross-products of the regressors. Perfect multicollinearity makes the X′X matrix singular (its determinant is zero), meaning its inverse (X′X)−1 does not exist. Without this inverse, the OLS estimators (β^=(X′X)−1X′y) cannot be computed or are undefined.
When a firm’s decision to produce decreases the wellbeing of others, but the firm does not compensate those others. It is a case of______.
...Which of the following is not a test related to Heteroscedasticity?
India traditionally runs a large Merchandise Trade Deficit (Goods). What is the key component that typically counteracts this to keep the Current Accoun...
If the economy is operating at point C, the opportunity cost of producing an additional 20 units of bacon is
Under a fixed exchange rate system with perfect capital mobility, what happens when the government increases its spending?
An unbiased coin is tossed until a head appears. The expected number of tosses required is
Consider a closed economy wherein
C = 0.60 Yd , t = 0.25 , I = 900 – 30i , G = 800, L = 0.20 Y – 50i , M/P = 500
Where in Yd = Dis...
In an open economy, ceteris paribus, If the marginal propensity to import increases, what will be the impact on Income Multiplier?
In the foreign exchange market price of US Dollar rises from ₹ 60 to ₹ 61. This means that_____
