PRINCIPLES OF MACROECONOMICS (OER)
2nd Edition
ISBN: 2810023110024
Author: OpenStax
Publisher: XANEDU
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Textbook Question
Chapter 9, Problem 11RQ
How do economists use a basket of goods and services to measure the
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Using data from 1988 for houses sold in Andover, Massachusetts, from Kiel and McClain
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n = 135, R2 = 0.162.
Interpretation of the slope coefficient?
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CEO Salary and Firm SalesWe can estimate a constant elasticity model relating CEO salary to firm sales. The data set is the same one used in Example 2.3, except we now relate salary to sales. Let sales be annual firm sales, measured in millions of dollars. A constant elasticity model is[2.45]ßßlog (salary) = ß0 + ß0log (sales) + u,where ß1 is the elasticity of salary with respect to sales. This model falls under the simple regression model by defining the dependent variable to be y = log(salary) and the independent variable to be x = log1sales2. Estimating this equation by OLS gives[2.46]log (salary)^=4.822 + 0.257 (sales) n = 209, R2 = 0.211.The coefficient of log(sales) is the estimated elasticity of salary with respect to sales. It implies that a 1% increase in firm sales increases CEO salary by about 0.257%—the usual interpretation of an elasticity.
Chapter 9 Solutions
PRINCIPLES OF MACROECONOMICS (OER)
Ch. 9 - Table 22.4 shows the fruit prices that the typing...Ch. 9 - Construct the price index for a fruit basket in...Ch. 9 - Compute the inflation rate for fruit prices from...Ch. 9 - Edna is living in a retirement home where home...Ch. 9 - How to Measure Changes in the Cost of Living...Ch. 9 - The Consumer Price Index is subject to the...Ch. 9 - Go to this website...Ch. 9 - If inflation rises unexpectedly by 5, would a...Ch. 9 - How should an increase in inflation affect the...Ch. 9 - A fixed-rate mortgage has the same interest rate...
Ch. 9 - How do economists use a basket of goods and...Ch. 9 - Why do economists use index numbers to measure the...Ch. 9 - What is the difference between the price level and...Ch. 9 - Why does substitution bias arise if we calculate...Ch. 9 - Why does the quality/new goods bias arise if we...Ch. 9 - What has been a typical range of inflation in the...Ch. 9 - Over the last century, during what periods was the...Ch. 9 - What is deflation?Ch. 9 - Identity several parties likely to he helped and...Ch. 9 - What is indexing?Ch. 9 - Name several forms of indexing in the private and...Ch. 9 - Inflation rates, like most statistics, are...Ch. 9 - Given the federal budget deficit in recent years,...Ch. 9 - Why is the GDP deflator not an accurate measure of...Ch. 9 - Imagine that the government statisticians who...Ch. 9 - Describe a situation, either a government policy...Ch. 9 - Describe a situation, either a government policy...Ch. 9 - Why do you mink the U.S. experience with inflation...Ch. 9 - If, over time, wages and salaries on average rise...Ch. 9 - Who in an economy is the big winner from...Ch. 9 - If a government gains from unexpected inflation...Ch. 9 - Do you think perfect indexing is possible? Why or...Ch. 9 - The index number representing the price level...Ch. 9 - The total price of purchasing a basket of goods in...Ch. 9 - With in 1 or 2 percentage points, what has the...Ch. 9 - If inflation rises unexpectedly by 5, indicate for...Ch. 9 - Rosalie the Retiree knows that when she retires in...
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