Question: Take the linear regression model: Y = 0 + 1X + U, with E [U|X] = 0. (a) Show that Cov (X,U) = 0. (b)

Take the linear regression model: Y = 0 + 1X + U, with E [U|X] = 0.

(a) Show that Cov (X,U) = 0.

(b) Show that 1 = Cov (X,Y) / Var (X).

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