THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
A loan officer is interested in examining the determinants of the total dollar value of residential loans made during a month.She used Y = β 0 + β 1 X 1 + β 2 X 2 + β 3 X 3 + β 4

+ ε to model the relationship,where Y is the total dollar value of residential loans in a month (in millions of dollars),X 1 is the number of loans,X 2 is the interest rate,and X 3 is the dollar value of expenditures of the bank on advertising (in thousands of dollars).Suppose that by using data from the past 24 months,she obtained
= 3.8 + 0.23x 1 - 1.31x 2 + 0.032x 3 - 0.0005
.
-In multiple regression models,the values of the error variable ε are assumed to be:
A)autocorrelated.
B)dependent of each other.
C)independent of each other.
D)always positive.

Question

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
A loan officer is interested in examining the determinants of the total dollar value of residential loans made during a month.She used Y = β 0 + β 1 X 1 + β 2 X 2 + β 3 X 3 + β 4

+ ε to model the relationship,where Y is the total dollar value of residential loans in a month (in millions of dollars),X 1  is the number of loans,X 2 is the interest rate,and X 3 is the dollar value of expenditures of the bank on advertising (in thousands of dollars).Suppose that by using data from the past 24 months,she obtained  
= 3.8 + 0.23x 1 - 1.31x 2 + 0.032x 3 - 0.0005  
.
-In multiple regression models,the values of the error variable ε are assumed to be:
A)autocorrelated. 
B)dependent of each other. 
C)independent of each other. 
D)always positive.

Quizplus · Accepted Answer

In multiple regression models, the values of the error variable ε are assumed to be independent of each other. Therefore, option C is the correct choice. The other options are not applicable to the error variable in multiple regression models.