Question: 1. Consider the regression model: In(sav) = Bo + B, In (inc) + u where in(sav) is the natural log of annual savings of household

1. Consider the regression model: In(sav) = Bo + B, In (inc) + u where in(sav) is the natural log of annual savings of household i In (inc) is the natural log of annual income of household i u = inco2e is the error term of household i Assume that elinc-N(0,0%); e, and inc are independent. (b) Given your answer in part (a), find the conditional expectation of the natural log of savings, E(In (sav)linc), and conditional variance of the natural log of savings, Var(In (sav)linc). Explain whether the OLS estimator for B, is the Best Linear Unbiased Estimator (BLUE). [Maximum 300 words)

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