Which of the following correctly highlights a limitation of applying simultaneous equation models to time series data?
A. Most time series have variables with a unit root and 2SLS is complicated when applied to equations with such variables.
B. 2SLS estimates are inefficient when applied to variables that are not in their levels but in first differences.
C. It is difficult to form simultaneous equations which satisfy the rank and order conditions using time series data.
D. The problem of serial correlation greatly limits the efficiency of simultaneous equation models and leads to inefficient estimations.
Answer: A
You might also like to view...
Voluntary trade promotes economic progress because
a. it discourages businesses from seeking lower per-unit costs through adoption of mass production methods. b. it discourages trade based on the comparative advantage of suppliers. c. it moves goods, services and resources from people who value them less to individuals who value them more. d. This is a trick question; voluntary exchange does not promote economic progress.
According to the Clean Air Act, a new firm in the covered industry is required to:
A. obtain a permit to pollute and at least match the most effective system existing in the industry. B. obtain a permit to pollute. C. at least match the most effective system existing in the industry. D. None of the statements are correct.
Critics of supply-side economics:
A. argue that a tax cut will increase aggregate supply by more than it increases aggregate demand. B. contend that the relationship between tax rates and economic incentives is small and of uncertain direction. C. believe that a decline in tax rates will increase tax revenues. D. point out that tax cuts enable households to substitute work for leisure.
If, when you consume another piece of candy, your marginal utility is zero, then
A) you want more candy. B) you have not yet reached the point of diminishing marginal utility. C) you should consume less candy. D) you have maximized your total utility from consuming candy.