When you have an omitted variable problem, the assumption that E(ui Xi) = 0 is violated. This implies that
A) the sum of the residuals is no longer zero.
B) there is another estimator called weighted least squares, which is BLUE.
C) the sum of the residuals times any of the explanatory variables is no longer zero.
D) the OLS estimator is no longer consistent.
Answer: D) the OLS estimator is no longer consistent.
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In an economy, there is $200 million in currency held outside banks, $100 million in traveler's checks, $250 million in currency held inside the banks, $300 million in checking deposits, and $600 million in savings deposits
The value of M1 is ________. A) $750 million B) $1,200 million C) $1,150 million D) $600 million
At the equilibrium price, the quantity of the good that buyers are willing and able to buy
a. is greater than the quantity that sellers are willing and able to sell. b. exactly equals the quantity that sellers are willing and able to sell. c. is less than the quantity that sellers are willing and able to sell. d. Either a) or c) could be correct.
Tom and Lilly rented a house for $12,000 last year. At the start of the year they bought the house they had been renting directly from the owner for $250,000 . They believe they could rent it for $12,000 this year, but stay in the house. How much does Tom and Lilly's decision to buy the house change GDP?
a. it reduces GDP by $12,000 b. it does not change GDP c. it raises GDP by $238,000 d. it raises GDP by $250,000
The Coase theorem states that if private parties can negotiate the purchase and sale of the right to perform activities that cause externalities, then they:
A. will never arrive at efficient solutions to the problems caused by externalities. B. will never perform activities that generate negative externalities. C. will always perform activities that generate positive externalities. D. can always arrive at efficient solutions to the problems caused by externalities.