Consider the following regression model: log(y) = 0 + 1x1 +

style="vertical-align:middle;" />2x12 + 3x3 + u. This model will suffer from functional form misspecification if _____.

A. ₀ is omitted from the model
B. u is heteroskedastic
C. x₁² is omitted from the model
D. x₃ is a binary variable

Answer: C

Economics

If the economy experiences a negative supply shock, which of the following will be true?

A) Inflation will fall, and real GDP will fall. B) Inflation will rise, and real GDP will rise. C) Inflation will fall, and real GDP will rise. D) Inflation will rise, and real GDP will fall.

The primary source of colonial productivity growth in agriculture was:

a. learning by doing. b. an increased capital-labor ratio. c. technology improvements. d. the introduction of hybrid seeds and fertilizer.