Question

1.) Perfect Multicollinearity is the

a. Presence of significant linear association between adjacent residuals

b. Presence of perfect linear association among independent variables in the sample

c. None of the above

d.Presence of zero linear association among independent variables in the sample

2.) Some of the possible reasons for impure correlation are:

a. The unavoidable high correlations between the dependent and independent variables

b. The wrong functional forms

c. The seasonality in the data

d.The high range of variation in the value of some independent variables

Answer 1

1.) Perfect Multicollinearity is the

• (b). Presence of perfect linear association among independent variables in the sample

Explanation: In perfect Multicollinearity, randomness of the regression model is 0. The correlation coefficent is exact -1 or +1. It means the independent variables are perfectly associated.

2.) Some of the possible reasons for impure correlation are:

• (b).The wrong functional forms.

Explanation: we cannot comapre between two different functional forms, different unit . To correlate, the variables must be of same type or same functional forms.