Differentiate between the current account balance and the capital account balance.
What will be an ideal response?
The current account balance includes international purchases and sales of goods and services, cross-border interest and dividend payments, and cross-border gifts to and from both private individuals and governments. The capital account balance includes purchases and sales of financial assets to and from citizens and companies of other countries.
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The demand for salt is relatively price inelastic, while the demand for pretzels is relatively price elastic. How can you best explain why?
What will be an ideal response?
If the instruments are not exogenous,
A) you cannot perform the first stage of TSLS. B) then, in order to conduct proper inference, it is essential that you use heteroskedasticity-robust standard errors. C) your model becomes overidentified. D) then TSLS is inconsistent.