Question: Consider the savings function sav = 0 + 1 inc + u , u = i 2 n c e where e i s a

Consider the savings function
sav=0+1inc+u,u=i2nce
where eis a random variable with E(e)=0 and Var(e)=e2. Assume that eis
independent of inc.
a. Show that E(u|inc)=0eis independent of inc, then inc
Consider the savings function sav = 0 + 1 inc + u

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