In the Fixed Time Effects regression model, you should exclude one of the binary variables for the time periods when an intercept is present in the equation
A) because the first time period must always excluded from your data set.
B) because there are already too many coefficients to estimate.
C) to avoid perfect multicollinearity.
D) to allow for some changes between time periods to take place.
Answer: C) to avoid perfect multicollinearity.
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Under a balanced budget policy, a sharp rise in GDP will cause
A. no serious budget changes. B. a tax cut or an increase in expenditures. C. a tax increase or expenditure cut. D. tax receipts to exceed government expenditures.
An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease