MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 20, Problem 5DQ
To determine
To Ascertain: The reasons whether the given information helped the country in fulfilling its requirements.
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The figure to the right gives an economy's initial aggregate demand (AD) curve.
Using the line drawing tool, show an increase in aggregate demand. Properly label this line.
Part 2
Note: Carefully follow the instructions above and only draw the required object.
Part 3
Which of the following will generate an increase in aggregate demand?
A.
A decrease in the price level.
B.
A decrease in the money supply.
C.
Increased government expenditures for war.
D.
A tax increase.
Problem 2
Experiments/Randomized Control Trial
Suppose you are interested in studying the effect of academic counselling on the years it
takes for a student to obtain an undergraduate degree. You conduct a randomized control
trial to answer the question. You randomly assign 2500 individuals in a university in New
York to receive academic counselling and 2500 students to not receive any academic
counselling.
a. Which people are a part of the treatment group and which people are a part of the
control group? (5 points)
b. What regression will you run? Define the variables where required. (5 points)
Λ
c. Suppose you estimate ß₁ = -0.3. Interpret it. (5 points)
1
d. You test for balance using the variables mentioned in the table below. Based on the
results do you think that the treatment and control group are balanced? If your
answer is "yes" then explain why. If your answer is "no", then explain why and mention
how will you address the issue of imbalance. (10 points)
Variable
GPA
Average…
Problem 1
Experiments/Randomized Control Trial
Suppose you are interested in studying the effect of being a part of the labor union on an
individual's hourly wage.
You collect data on 1000 people and run the following regression.
Wage=Bo+B₁Labor Union; + &¿
where Labor Union is a dummy variable which is equal t to 1 for people who are a part of
labor union and 0 for others.
a. Suppose you estimate
b. Do you think
B₁ = 1.6. Interpret B₁ (5 points)
1
1
is biased or unbiased? Explain. (5 points)
Now suppose you conduct a randomized control trial to answer the same question. You
randomly assign some individuals to be a part of the labor union and others to not be a part
of the labor union. The first step you take is to ensure that the randomization was done
correctly. Then you estimate the following equation:
=
Wage, Bo+B₁Treatment; + &;
Treatment =1 if the student is assigned to be a part of Labor Union
Treatment=0 if the student is assigned to not be a part of Labor Union
c. Why is it…
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