Which of the following is true of the correlated random effects approach (CRE)?
A. The CRE approach assumes that the unobserved effect is uncorrelated with the observed explanatory variables.
B. The CRE approach cannot be used if the regression model includes a time-constant explanatory variable.
C. The CRE approach considers that the unobserved effect is correlated with the average level of explanatory variables.
D. The CRE estimate equals the random effects estimate.
Answer: C
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Say's law explains
A) how long-run real Gross Domestic Product (GDP) stability is achieved in the Keynesian model. B) why economies experience business cycles. C) how the economy can go into recession. D) how long-term real Gross Domestic Product (GDP) stability is achieved in the classical model.
If expectations of the future inflation rate are formed solely on the basis of a weighted average of past inflation rates, then economists would say that expectation formation is
A) irrational. B) rational. C) adaptive. D) reasonable.
According to the text, as compared to rich countries, most of the poor countries do not fare well because:
a. they have no oil. b. the people in these countries have limited property rights. c. access to education in these countries is very limited. d. high tariffs in these countries prevent international trade. e. they do not have any natural resources.
Suppose a market is initially in equilibrium and supply increases. The consumer surplus will:
a. be higher since the price is lower and equilibrium moves down along the demand curve. b. be higher, since the price is lower and will move you down along the demand curve. c. be higher since the price is lower and equilibrium moves up along the demand curve. d. be lower since the price is lower and equilibrium moves up along the demand curve.