Consider the Following Simple Regression Model: Y = β₀+ β₁x₁

Multiple Choice

Consider the following simple regression model: y = β₀+ β₁x₁+ u.In order to obtain consistent estimators of β₀and β₁,when x and u are correlated,a new variable z is introduced into the model which satisfies the following two conditions: Cov(z,x) ≠0 and Cov (z,u) =0.The variable z is called a(n) _____ variable.

A) dummy
B) instrumental
C) lagged dependent variable
D) random