Explain limitations of the linear probability model

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Reference no: EM132924349

1. With the aid of an illustration, explain the following terms:

a) Marginal deficiency of capital

b) Labour market equilibrium

c) National income equilibrium

d) Aggregate demand

e) Liquidity trap

f) Paradox of thrift

g) Ratchet effect

h) IS-LM curve

2. Distinguish using a diagram, short term aggregate supply and aggregate demand.

3. Explain limitations of the linear probability model.

a) Using illustrations, explain the Logit model and its derivations.

b) Site the major differences between Logit Model and the Linear Probability Model.

4. Explain how you would obtain reduced form equations from the structural equation.

Reference no: EM132924349

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