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(a) What are the problems associated with R2 and how can adjusted R2 solve them?
(b) If the regressors in an equation are highly correlated, which measures can be used to solve this problem?
(c) What do you understand by a dynamic model and show all the steps involved in deriving its long-run static equilibrium solution?
(d) Suppose we have a model given by:
log Qt = 42.95 + 0.387 log Kt +0.613 log Lt (1.96) (3.01) (2.19)
Where Q is output, K is capital and L is labour. R2 = 0.78, D-W=2.45, number of observation is 35 years and the values in brackets represent t-ratios.
A government official announces a new policy. The country wishes to eliminate its trade deficit, but will strongly encourage financial investment from foreign firms. Explain why su
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Axioms: Revealed preference theory is based on the axioms listed below. • Consumer will spend all her income on goods. The consumer equilibrium always remains on the budg
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Question: (a) Write down the Classical Linear Regression Model (CLRM) and explain its assumptions in detail. (b) The following data relating to information collected on
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THEORY OF REVEALED PREFERENCE: If consumer's taste and preferences do not change, then observation of her market behaviour or, actual act of choice between the commodity sets
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