Suppose the nominal interest rate is zero. In this situation, the present discounted value of a finite sequence of future payments is equal to which of the following?
A) zero
B) the sum of the all payments divided by the rate of inflation
C) the average value of each payment
D) the sum of all payments
E) the square of the sum of all payments
D
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As a group, U.S. consumers have no income response for their consumption of ice cream so that the income elasticity of demand for ice cream equals zero
Does this mean that the change in ice cream consumption that results from a price increase is entirely composed of the substitution effect? A) Yes, the income effect associated with a price change is zero B) No, any price change moves the point of consumption to a new indifference curve, so there must be a non-zero income effect C) No, the income and substitution effects in this case move in opposite directions and completely offset one another, so it only appears that the income effect is zero D) We need more information about the goods to answer this question
With heteroskedastic errors, the weighted least squares estimator is BLUE. You should use OLS with heteroskedasticity-robust standard errors because
A) this method is simpler. B) the exact form of the conditional variance is rarely known. C) the Gauss-Markov theorem holds. D) your spreadsheet program does not have a command for weighted least squares.