For Figure 6.9 in the book, MRTS = K/(4L) with capital (K) on the vertical axis of the isoquant map. Suppose L=100 hours and K=400 machine hours at the current level of output
How much additional labor is required to maintain output if we reduce capital by one machine hour? A) One hour
B) Two hours
C) Three hours
D) Four hours
A
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Having more relevant instruments
A) is a problem because instead of being just identified, the regression now becomes overidentified. B) is like having a larger sample size in that the more information is available for use in the IV regressions. C) typically results in larger standard errors for the TSLS estimator. D) is not as important for inference as having the same number of endogenous variables as instruments.
Data on annual percentage changes in real GDP, consumption, and investment in the United States shows that fluctuations in investment _____
a. are noticeably smaller during expansions than during recessions b. are roughly similar to fluctuations in consumption c. are roughly similar to fluctuations in GDP d. are closely followed by economic forecasters because those fluctuations often signal that a recession will occur e. account for most of the variability in GDP