A typical remedy for perfect multicollinearity amongst control variables is to:
A) use an instrumental variable.
B) use the within estimator.
C) drop one of the control variables that is exactly linear with other control variables.
D) use the t-test.

Question

Quizplus · Accepted Answer

Dropping one of the control variables that is exactly linear with other control variables is the best remedy for perfect multicollinearity among control variables. This is because having a linear relationship between two or more control variables can cause issues with accurately estimating the coefficients of the other variables in the regression model. By dropping one of the linearly related variables, we can eliminate the issue of perfect multicollinearity while still retaining the information provided by the remaining control variables.

A Typical Remedy for Perfect Multicollinearity Amongst Control Variables Is