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1. Multiple Choice: Which of the following is a key assumption of the Classical Linear Regression Model (CLRM)? a) Homoscedasticity b) Heteroscedasticity c) Multicollinearity d) Autocorrelation Answer: a) Homoscedasticity Rationale: Homoscedasticity assumes that the variance of the error terms is constant across all levels of the independent variables. 2. True/False: The presence of autocorrelation in the residuals of a regression model always indicates a misspecification of the functional form. Answer: False Rationale: While autocorrelation can indicate a misspecification, it can also be due to other factors such as omitted variables or measurement error.
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