Consider the following simple regression model: y = 
0 + 1x1 + u. Suppose z is an instrument for x. Which of the following conditions denotes instrument exogeneity?
A. Cov(z,u) > 0
B. Cov(z,x) > 0
C. Cov(z,u) = 0
D. Cov(z,x) = 0
Answer: C
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If the deficit is 0.08 times GDP, the existing debt—GDP ratio is 0.8, and the growth rate of nominal GDP is 0.05, then the change in the debt—GDP ratio is
A) +0.08 B) +0.04. C) 0. D) -0.08.
Refer to the above figure. Line C in Panel B does NOT represent
A) the equilibrium price. B) average revenue. C) total revenue. D) marginal revenue.
If a perfectly competitive firm is producing at a quantity at which MC < AVC, it cannot be maximizing profit in the short run
a. True b. False
An activity that would not be included in GDP would be:
A. a sweater you knit for your roommate for her birthday. B. paying a company for cleaning your house. C. getting tomatoes from your garden and making salsa with them. D. None of these would be included in GDP.