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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.
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assingnment on production cost
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