are ignoring and that end up in the error term. a) Suppose that Cov(X;,W;) > 0 and that Cov(X¡, Z¡) > 0. Is it possible that Al holds in this situation? Please explain why using both formality and intuition. b) Suppose that Cov(X¡,W;) > 0 and that Cov(X¡, Z¡) < 0. Is it possible that the regressor is uncorrelated with the error term? Can you say precisely when this is the case? c) Does Cov(X¡, u¡) = 0 imply that A1 holds?

Fig: 1

Fig: 2

Fig: 3

Fig: 4

Fig: 5

Fig: 6