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27-05-2023
Business

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Suppose aggregate consumption (C;) and GDP (Y;) for a sample of economies are simultaneously determined by the following equations: C₁ = Bo + B₁Y₁ + Uį Yį = C₁ + Iį where u; is the random error term, and investment (I;) is given exogenously. Explain why the OLS estimator of B₁ is inconsistent.

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