ECON MACRO
ECON MACRO
5th Edition
ISBN: 9781337000529
Author: William A. McEachern
Publisher: Cengage Learning
Question
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Chapter 15, Problem 2.5P

Sub-part

A

To determine

whether the fed would increase or decrease the money supply.

Sub-Part

B

To determine

whether the fed should buy or sell government securities in case it uses open market operations.

Sub-Part

C

To determine

whether the interest rate and the quantity of money demanded would increase, decrease or remains unchanged.

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Problem 1-Experiments/Randomized Control TrialSuppose you are interested in studying the effect of being a part of the labor union on anindividual’s hourly wage.You collect data on 1000 people and run the following regression. where is a dummy variable which is equal t to 1 for people who are a part of labor union and0 for others. a. Suppose you estimate . Interpret b. Do you think is biased or unbiased? Explain. Now suppose you conduct a randomized control trial to answer the same question. Yourandomly assign some individuals to be a part of the labor union and others to not be a partof the labor union. The first step you take is to ensure that the randomization was donecorrectly. Then you estimate the following equation: =1 if the student is assigned to be a part of Labor Union=0 if the student is assigned to not be a part of Labor Union c. Why is it important to ensure that the randomization is done correctly? d. Name any two variables that you can use to test if Treatment and…
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