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Assume an AR(1) scheme for the error term. What are the consequences of this, in light...

Assume an AR(1) scheme for the error term. What are the consequences of this, in light of the Classical Linear Regression Model assumption that the error terms in the population regression function should be uncorrelated? Explain.

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. Auto correlation can be defined as the degree of correlation between the members of the same series itself . In Econometrics Auto correlation in econometrics implies the existence of correlation between the error terms itself. The addition of random or stochastic term u to a static equation makes it a stochastic . For eg : consider the Keynesian model ie look from the first photo

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