In a regression model such as y = β₀ + β₁X₁ + β₂X₂ + ε,if changes in x₁ and x₂ happen simultaneously,the model is said to be affected by: A)specification bias. B)heteroscedasticity. C)multicollinearity. D)autocorrelation.

Question

Quizplus · Accepted Answer

The simultaneous changes in x₁ and x₂ suggest a high degree of correlation between these independent variables, which can lead to multicollinearity in the model. Multicollinearity can affect the regression coefficients and make them unstable, making it difficult to interpret the relationship between the independent and dependent variables accurately.

In a Regression Model Such as Y = β0

In a Regression Model Such as Y = β₀