When estimating a cubic short-run production function Q = AL3 + BL2 using linear regression analysis, you must
A. convert the right-hand-side variables to logarithms.
B. suppress the intercept term (regress through the origin).
C. transform the equation into linear form by defining L3 and L2 as L3 and L2, respectively.
D. both a and b
E. both b and c
Answer: D
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For this question, use the Keynesian IS—LM model with flexible exchange rates. Eastland's main trading partner is Westland. Suppose Westland undertakes an expansionary monetary policy
(a) What is the effect of Westland's expansionary monetary policy on Eastland's real exchange rate in the short run, assuming no change in Eastland's policies? (b) What is the effect of Westland's expansionary monetary policy on Eastland's real exchange rate in the long run, assuming no change in Eastland's policies? (c) What is the effect of Westland's expansionary monetary policy on Eastland's nominal exchange rate in the short run and in the long run?
Whenever statements embodying values are made, we enter the realm of
A) positive economics. B) normative economics. C) microeconomics. D) macroeconomics.