Question

A microeconomist wants to determine how corporate sales are influenced by capital and wage spending by companies. She proceeds to randomly select 26 large corporations and record information in millions of dollars. A statistical analyst discovers that capital spending by corporations has a significant inverse relationship with wage spending. What should the microeconomist who developed this multiple regression model be particularly concerned with? A)normality of residuals B)randomness of error terms C)collinearity D)missing observations

Answer 1

C. Collinearity

Explanation:

Collinearity is basically a situation where you have most of the variables correlating.