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Question One (4 marks) Consider the classical simple linear regression model: ?? = ?0 + ?1??...

Question One


Consider the classical simple linear regression model:
?? = ?0 + ?1?? + ??, ?? ~ ?. ?. ?. (0, ?2)

(a) Provide, with details, the appropriate expressions for ?(??) & ???(??). Assume
that ?(??) = ??, ???(??) = ?^2? & ???(??, ??) = 0; i.e., that ?? & ?? are
uncorrelated.
2.5 marks


(b) Suppose now that the explanatory variable ?? is correlated with ?? such that
???(??, ??) = ???. Under this scenario, derive ?(??) & ???(??).
1.5 marks

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