The classical errors-in-variables (CEV) assumption is that _____.
A. the error term in a regression model is correlated with all observed explanatory variables
B. the error term in a regression model is uncorrelated with all observed explanatory variables
C. the measurement error is correlated with the unobserved explanatory variable
D. the measurement error is uncorrelated with the unobserved explanatory variable
Answer: D
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Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; potential C. higher; higher D. lower; higher
From the net tax function: T = t0 + t1Y, where t0 < 0 and t1 > 0, it follows that, as income rises
a. average taxes falls and the surplus declines. b. average taxes rises and the deficit increases. c. average taxes falls and the deficit declines. d. Average taxes and the deficit do not change.
Prior to World War II, the international financial system had operated on
a. a floating exchange rate system b. a managed exchange rate system c. a laissez-faire exchange rate system d. the gold standard e. the dollar standard
Which of the following would likely make the interest rate on a bond higher than otherwise?
a. both high credit risk and a long term b. high credit risk but not a long term c. a long term but not a high credit risk d. neither high credit risk nor a long term