Two Stage Least Squares is calculated as follows; in the first stage:
A) Y is regressed on the exogenous variables only. The predicted value of Y is then regressed on the instrumental variables.
B) the unknown coefficients in the reduced form equation are estimated by OLS, and the predicted values are calculated. In the second stage, Y is regressed on these predicted values and the other exogenous variables.
C) the exogenous variables are regressed on the instruments. The predicted value of the exogenous variables is then used in the second stage, together with the instruments, to predict the dependent variable.
D) the unknown coefficients in the reduced form equation are estimated by weighted least squares, and the predicted values are calculated. In the second stage, Y is regressed on these predicted values and the other exogenous variables.
Answer:
B) the unknown coefficients in the reduced form equation are estimated by OLS, and the predicted values are calculated. In the second stage, Y is regressed on these predicted values and the other exogenous variables.
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If the dollar price of foreign currencies falls (that is, the dollar appreciates), we would expect:
A. aggregate demand to decrease and aggregate supply to increase. B. both aggregate demand and aggregate supply to decrease. C. both aggregate demand and aggregate supply to increase. D. aggregate demand to increase and aggregate supply to decrease.
Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Quick Burger Operates aDrive-Through WindowQuick Burger Does NotOperate Drive-Through WindowQuick Burger$24,000$15,000The Sunshine Café$11,000$23,000Suppose Quick Burger has the legal right to operate a drive-through window, and Quick Burger and the Sunshine Café can negotiate with each other at no cost. Which of the following arrangements would lead to the socially optimal outcome?
A. The Sunshine Café pays Quick Burger $10,500 per month not to operate the drive-through window. B. Quick Burger pays The Sunshine Café $10,500 per month to operate the drive-through window. C. The Sunshine Café pays Quick Burger $12,500 per month not to operate the drive-through window. D. Quick Burger pays The Sunshine Café $12,500 per month to operate the drive-through window.