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Klein and Goldberger attempted to fit the following regression model tothe U.S. economy:Yi = ß1 + ß2X2i + ß3X3i + ß4X4i + uiwhere Y = consumption, X2 = wage income, X3 = nonwage, nonfarmincome, and X4 = farm income. But since X2, X3, and X4 are expected tobe highly collinear, they obtained estimates of ß3 and ß4 from crosssectionalanalysis as follows: ß3 = 0.75ß2 and ß4 = 0.625ß2. Using theseestimates, they reformulated their consumption function as follows:Yi = ß1 + ß2(X2i + 0.75X3i + 0.625X4i ) + ui = ß1 + ß2 Zi + uiwhere Zi = X2i + 0.75X3i + 0.625X4i .
a. Fit the modified model to the data in Table 10.11 and obtain estimatesof ß1 to ß4 .
b. How would you interpret the variable Z?
Joseph starts to make quarterly deposits of $1,500 (at the end of a quarter) into an investment account at the age of 45. If he wants to have $250,000 when he retires at the age of 65, what must be the nominal and the effective interest rates per ..
(Comparative Advantage) Suppose that each U.S. worker can produce 8 units of food or 2 units of clothing daily. In Izodia, which has the same number of workers, each worker can produce 7 units of food or 1 unit of clothing daily.
After understanding the meaning of EOU and reviewing different examples in your textbook, the exercise below will allow you to practice how to define and calculate an EOU. Your Course Business Plan (to be developed by you as your Final project) wi..
A facility requires $2500000 in debt capital. The plan is to sell twenty-year bonds that pay 4.2 percent per year, payable quarterly, at a 3 percent discount on the face value. The facility has an effective tax rate of 35 percent per year.
the production function: Q=5KL the assembly machines, K, costs $10,000 a week, while labor teams, L, cost $5000 per week. your plant has 4 assembly machines In the short run, ____ labor teams are required to produce 360 widgets.
some company uses capital and labor to produce gizmos. the marginal product of capital is 600, and the marginal rate of technical substitution of labor for capital is 1/4. Calculate the marginal product of labor.
Gasoline costs $0.95 per liter and will increase at 6% per year. At a fuel economy of 9km/liter, what is the present worth cost of fuel for five years of driving 30,000km per year Use 6.2% interest. What is the equivalent equal annual cost of the ..
Assume the current prices in the market are challenged by the regulatory agency, resulting in a new maximum price of $2,000. How will this change the industry output and market share for each company
A firm has decided through regression analysis that its sales (S) are a function of the amount of advertising (measured in units) in two different media, television (x) and magazines (y): S(x, y) = 100 - x^2 + 30x - y^2 + 40y (a) Find the level o..
What is the marginal opportunity cost of producing the first unit of paper? The marginal opportunity cost of producing the fourth unit of paper?
It is sometimes said that a central bank is a necessary element for a balance-of-payments deficit. What is the explanation for this argument?
Give an example of other characteristics of the data.
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