Multiple Choice
The following regression results are from the first stage regression of Price on income and wholesale costs-which is serving as the instrument for a particular grocery product across different markets: Pricei = 3.2(1.0) + 4.3(0.8) WholesaleCostsi + 5.5(2.7) Incomei, where standard errors are reported in parenthesis. What conclusion can be drawn about the instrumental variable?
A) It's unbiased.
B) With a t-stat over 2.5 (4.3/0.8) , the instrument is relevant.
C) With a t-stat over 2.5 (4.3/0.8) , the instrument is exogenous.
D) It's under reporting the effect of income on price.
Correct Answer:
Verified
Correct Answer:
Verified
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