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The final and most important part of the methodology is the impulse response functions which will provide the most information with regards to the aim of the project. In order to analyse the variables response to an oil price shock, the VAR has to transform into its Moving Average representation. The moving average representation is necessary to find the impulse response function of the VAR model. In this project I will assess the impulse responses using the typical Cholesky Decomposition. From these responses, future responses of each variable to a shock in oil price can be analysed. Impulse responses display the response of the future values of each variable to a one standard deviation oil price shock, whilst making the assumption that the shock normalises and returns to zero in subsequent periods. Furthermore it is assumed that all other errors are also zero. The underlying thought behind shocking one variable whilst ensuring that the others remain constant is the most effective way of measuring the impact of an oil price shock on other macroeconomic variables. Therefore this section will form the strongest case as to whether natural oil price shocks impact positively or negatively on the key macroeconomic variables in the UK.
Marginal cost curves generally slope: a) downward because of decreasing opportunity cost b) upward because of decreasing opportunity cost c) downward because of increasing opp
according to the Keynesian model, the short-run aggregate supply curve is horizontal when: A: there are unemployed resources and prices do not fall when aggregate demands falls. B:
2.2 "Our business model works even if all internet software is free ....... We are still selling operating systems. What does Netscape''s business model look like? Not very good."
What is the different between price effect and sales effect? Both relate to Elasticity and Total Revenue: a. A price effect: After a price raise, all unit sold sells at a hi
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describe how open market policy can be used to stimulate economic activity in the country
To the extent that statutory compliance mandates conditions that formerly were only available to workers who had union negotiating power to win such conditions at the bargaining ta
What is the difference between the short-run framework and the long-run framework? Discuss how each relates to supply and demand.
Relationship between the interest rate and the bond price Note that the higher the issue price, the lower the interest rate. In the same way, when the price of a government bon
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