Which of the following correctly identifies a limitation of logarithmic transformation of variables?
A. Taking log of variables make OLS estimates more sensitive to extreme values in comparison to variables taken in level.
B. Logarithmic transformations cannot be used if a variable takes on zero or negative values.
C. Logarithmic transformations of variables are likely to lead to heteroskedasticity.
D. Taking log of a variable often expands its range which can cause inefficient estimates.
Answer: B
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In the GDP accounts, investment includes the purchase of newly issued shares of stock
Indicate whether the statement is true or false
If a product becomes more popular and consumers want more produced, which of the following best describes what happens to move more factors of production into that industry?
A) An agency of the Federal government directs the movement of factors. B) The chief executive officers or presidents of corporations require that factors leave one industry and move to the other industry. C) Factor owners voluntarily move their factors because they want to satisfy the interests of consumers. D) Wages, rent, interest, and profit increase in that industry, thereby giving factors the incentive to move to that industry. E) Consumers increase their demand for the products and, as a result, the taxes the producers must pay decrease enabling the producers to hire more factors of production.
When economists say that people act as rational decision makers, that means
a. they gather all relevant information before making their purchases b. once a pattern of behavior has been established, people tend to become set in their ways c. people respond in predictable ways to changes in costs and benefits d. people rarely make errors when they are permitted to make transactions e. once made, decisions are never reversed
Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C B. B; C C. B; A D. D; B