When an independent variable is exogenous
A) It is correlated with the error term
B) It is not correlated with the error term
C) It is correlated with the slope
D) It is not correlated with the slope

Question

Quizplus · Accepted Answer

An independent variable is considered exogenous if it is not correlated with the error term in the model. This means that the variable is not affected by other factors that are not included in the model and that it does not influence the dependent variable through some unobserved pathway. Therefore, an exogenous variable is not biased and does not violate the assumptions of the model.

When an Independent Variable Is Exogenous