Marco and Sarah are economists. Marco believes that raising taxes on capital gains will divert people from investing in capital stock market. To the contrary, Sarah is confident that investing in capital market is similar to gambling and no tax can stop people from buying stocks. They decide to use data and resolve their debate empirically. This is an example of describing the economy. testing hypothesis. qualifying relationships between certain variables. predicting the future.
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- Based on the literature review you finished, now you should develop theory and hypothesis. The number of hypotheses need not be too many, 1-3 hypotheses is enough as long as these hypotheses are TESTABLE. Please think of the data and methods that you will use in order to test the hypotheses that you developed. Theoretical ModelThe theory draws from the model developed by Barro and Lee (1994) which is consistent with the endogenous growth theory. Endogenous growth theory takes into account the sources of technological progress such as human capital and role of government (Romer, 1994). The theory contends that economic growth is related with developments of new ideas, innovation and overall technological change and total factor productivity. Following endogenous growth theory, the concept of “trade openness” in this paper is measured by three variables that take into account of sources of technological change. The three variables that measure trade openness are, trade dependency ratio,…Type I and Type II Errors. Please discuss Type I and Type II errors. What are they? Discuss their relationship with hypothesis testing.Citing relevant examples, explain any five properties of a good hypothesis.
- There are four key relationships upon which the Standard Model is based. Please list each of the four relationships and give one example for eachThis is not a writing assignment, this is a multiple-choice question All of the statements apply to he Theory of Markets EXCEPT this one: Group of answer choices Profits inspire some of our greates works, even in areas like higher education, the arts and medicine. People sometimes miscalculate their costs and benefits from actions sometimes, and do not necessarily make the best choices. When the price of gas rises some people switch to driving motorcycles. Statistics show that motorcycles have a high rate of accidents. Consumers always know what is in their best interest, and they do accurate cost-benefit assessments before making choices. Market transactions generally make all parties better off.18:23 : (C. a. Show that E(Y₂) = E(Y₁-1). (Hint: Read Key Concept 14.5.) b. Show that E(Y) = Bo/(1 − B₁). 14.1 Consider the AR(1) model Y₁ = B₁ + B₁Y₁-1 + U₁. Suppose that the pro- cess is stationary. 35 14.5 Prove the following results about conditional means, forecasts, and forecast errors: a. Let W be a random variable with mean µw and variance o and let c be a constant. Show that E[(W − c)²] = σ² + (µw − c)². b. Consider the problem of forecasting Y₁, using data on Y₁-1, Y₁-2, . . . . Let fi-1 denote some forecast of Y₁, where the subscript t - 1 on ft-1 indicates that the forecast is a function of data through date t 1. Let E[(Y₁-ft-1)² Y₁-1, Y₁-2,...] be the conditional mean squared error of the forecast fi-1, conditional on values of Y observed through date t 1. Show that the conditional mean squared forecast error is mini- mized when fi-1 = Y-1, where Y₁-1 = E(Y₁|Y₁-1,Y₁-2, ...). (Hint: Review Exercise 2.27.) c. Let u, denote the error in Equation (14.13). Show that cov(u₁,…
- You and your research partner want to use Instrumental Variable analysis to write an econometrics paper and find causal estimates. Your partner argues that because the residuals and the instrument are uncorrelated, the exogeneity requirement is satisfied. What do you tell your research partner: a) You agree, the exogeneity requirement is satisfied by construction b) You agree, the exogeneity requirement is satisfied by their demonstration c) You disagree, you would need the results of the White Test to make this conclusion d) You disagree, the exogeneity requirement cannot be tested as we do not observe the error terms e) You cannot make any conclusions with the current informationConsider Scenario A from the previous question. State whether you made a Type I error, a Type II error, or the correct conclusion. Children in your community have on average less than 5.2 books at home, and you reject the hypothesis that they have greater than or equal to 5.2 books. Children in your community have on average less than 5.2 books at home, and you fail to reject the hypothesis that they have greater than or equal to 5.2 books. Children in your community have on average greater than or equal to 5.2 books at home, and you reject the hypothesis that they have greater than or equal to 5.2 books.How to construct natural experiment in order to test the theory that the decrease in the supply of credit caused the Great Recession in 2007-2008? Is it helpful whether the banks in particular states tended to be particularly invested in mortgage-backed securities?