Exhibit 1A-7 Straight line relationship
According to Exhibit 1A-7, the relationship between annual income and air-travel expenditures is:

Consider a small open economy in equilibrium. What happens to the real interest rate, national saving, investment, and the current account balance in equilibrium in each of the following situations (each taken separately)

Explain which curve shifts and why, and show a diagram explaining your results. (You may assume that none of the shocks is large enough to significantly affect labor supply or labor demand significantly.) (a) wealth declines (b) business taxes decline (c) income rises temporarily

In practice, the most difficult aspect of IV estimation is

A) finding instruments that are both relevant and exogenous. B) that you have to use two stages in the estimation process. C) calculating the J-statistic. D) finding instruments that are exogenous. Relevant instruments are easy to find.