Macroeconomics
Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
Question
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Chapter 12, Problem 10PA

(a)

To determine

Y in the economy as a function of the r.

(b)

To determine

The slope of the IS curve.

(c)

To determine

The factor causing a horizontal shift in the IS curve.

(d)

To determine

The r as a function of Y, M, and P at the parameters e and f.

(e)

To determine

The slope of the LM curve.

(f)

To determine

The size of shift in the LM curve.

(g)

To determine

The aggregate demand curve of the economy.

(h)

To determine

The negative slope of the aggregate demand curve of the economy.

(i)

To determine

The shift in the aggregate demand curve to the right.

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4. Consider the following regression equation, where Google is equal to 1 if an individual in thesample has worked at Google and 0 otherwise, and Earnings is annual earnings in thousands ofpounds (standard errors in parentheses):Earnings \ = 25000(12.5)+ 42000(7.0)Google,(a) Interpret the coefficient on Google.(b) Is the coefficient on Google statistically significant at the 5% level? How do you know?(c) Suppose that instead of Google we had used a variable called NeverGoogle, equal to 1 if anindividual has never worked at Google and 0 otherwise. (i) How would the slope coefficientchange? (ii) What would happen to the intercept? (d) What prevents us from interpreting the coefficient on Google as a causal effect? Give examplesin your answer.
4. Examine the regression table below before answering the questions that follow.Throughout, the Log() function represents the natural logarithm, so that Log(e) =1:Dependent Variable: Log(Expenditures on Cigarettes + 1)Method: Least SquaresVariable Coefficient Std. ErrorConstant 0.50 0.41Log(Income+1) −0.02 0.002(a) Why are the dependent and explanatory variables in the form log(1+x), ratherthan log(x)? (b) Which of the above coefficients are statistically significant? How do you know?(c) Interpret the coefficient on Log(Income+1). (d) What is the predicted level of Log(Expenditures on Cigarettes + 1) for anobserved individual with income of e10 − 1? (4
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