Refer to the information provided in Table 22.3 below to answer the question(s) that follow. Table 22.3 PointAggregate Income (Y)Aggregate Consumption (C) A 15 19 B 30 23 C 45 27 D 60 31 E 75 35 F 90 39The data in the table was used to estimate the following consumption function: C = 20 + 0.2YRefer to Table 22.3. The error for point E is equal to
A. -2.
B. 0.
C. +1.
D. +3.
Answer: B
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In the case of exact identification
A) you can use the J-statistic in a test of overidentifying restrictions. B) you cannot use TSLS for estimation purposes. C) you must rely on your personal knowledge of the empirical problem at hand to assess whether the instruments are exogenous. D) OLS and TSLS yield the same estimate.
According to the classical view,
a. velocity is constant, which means changes in price will cause changes in price or quantity. b. quantity is constant, which means changes in the money supply could cause either changes in velocity or changes in prices. c. velocity and price are constant so that changes in the money supply causes changes in quantity. d. velocity and quantity are constant so that changes in the money supply cause changes in prices. e. velocity is constant while quantity is variable so that changes in the money supply change both price and quantity.
Consider a stock with a 50 percent probability of zero net earnings and a 50 percent probability of net earnings equal to $20 per share each year continuously in the future. Furthermore, assume that people are risk averse. That is, they will have to be compensated for uncertainty accompanying variation in their future wealth. If the interest rate were 5 percent, how much would people be willing
to pay for a share of this stock? a. $10 b. $200 c. less than $200 d. more than $200 e. $400
The exchange rate of the dollar relative to other currencies is determined by market forces. When equilibrium is present in the exchange rate market,
A) the purchases of Americans from foreigners will be equal to the sales of Americans to foreigners. B) imports from foreigners will create jobs in other countries but employment in the United States will decline by an equal amount. C) the gains of Americans from international trade will be just equal to the gains of foreigners from the trade. D) Americans will gain from the international trade only if foreigners lose an equal amount.