In a system of M simultaneous equations,at least M-1 variables must be excluded from each equation for the equation to be identified.What does it mean if the equation is not identified?
A)unique coefficient estimates for each variable cannot be identified using least squares
B)the economic value of the predicted value cannot be identified
C)the economic relationships are unclear and the equation should be dropped form the system
D)the exogenous variables have been incorrectly identified

Question

Quizplus · Accepted Answer

If an equation is not identified, it means that unique coefficient estimates for each variable cannot be identified using least squares. This makes it impossible to obtain meaningful estimates of the parameters and to make reliable predictions based on the equation. Therefore, the equation cannot be used in the system and should be dropped or modified until it becomes identified.

In a System of M Simultaneous Equations,at Least M-1 Variables