Exam Answer each of the following equally weighted questions.
Remember that the process by which you arrive at an answer earns most of the credit. A correct answer with no explanation or work showing does not receive full credit. We assume that the error term in an econometric equation is uncorrelated with the independent or explanatory variables in the equation. State the consequences of violating this assumption and describe a method of resolving it. Be sure to explain any assumptions which you make and describe the advantages or disadvantages of your approach.