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The Following Equations Represent a Simultaneous Equations Model: K1 =

Question 19

Multiple Choice

The following equations represent a simultaneous equations model: K1 = α1K2 + β1z1 + u1
K2 = α2K1 + β2z2 + u2
OLS will suffer from simultaneity bias if:


A) u1is correlated with z1.
B) z1 is correlated with z2.
C) K2 is correlated with u1.
D) K1? is correlated with u1.

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