The two conditions for a valid instrument are a. $\operatorname { corr } \left( Z _ { i } , X _ { i } \right) = 0$ and $\operatorname { corr } \left( Z _ { i } , u _ { i } \right) \neq 0$.
b. $\operatorname { corr } \left( Z _ { i } , X _ { i } \right) = 0$ and $\operatorname { corr } \left( Z _ { i } , u _ { i } \right) = 0$.
c. $\operatorname { corr } \left( Z _ { i } , X _ { i } \right) \neq 0$ and $\operatorname { corr } \left( Z _ { i } , u _ { i } \right) = 0$.
d. $\operatorname { corr } \left( Z _ { i } , X _ { i } \right) \neq 0$ and $\operatorname { corr } \left( Z _ { i } , u _ { i } \right) \neq 0$.

Question

Quizplus · Accepted Answer

The Answer is C

The Two Conditions for a Valid Instrument Are A corr⁡(Zi,Xi)=0\operatorname { corr } \left( Z _ { i } , X _ { i } \right) = 0corr(Zi​,Xi​)=0

The Two Conditions for a Valid Instrument Are A $\operatorname { corr } \left( Z _ { i } , X _ { i } \right) = 0$