The resource cost of inflation refers to
a. the opportunity cost of the resources spent coping with inflation
b. the redistribution of resources due to inflation
c. the lost purchasing power due to inflation
d. the lost real income due to inflation
e. the resources lost due to asking for higher nominal wage increase
A
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An economic principle that explains why people pursue different occupations is
A) NAFTA. B) international trade. C) absolute advantage. D) comparative advantage.
Consider the case of time fixed effects only, i.e., Yit = ?0 + ?1Xit + ?3St + uit,
First replace ?0 + ?3St with ?t. Next show the relationship between the ?t and ?t in the following equation Yit = ?0 + ?1Xit + ?2B2t + ... + ?TBTt + uit, where each of the binary variables B2, …, BT indicates a different time period. Explain in words why the two equations are the same. Finally show why there is perfect multicollinearity if you add another binary variable B1. What is the intuition behind the fact that the OLS estimator does not exist in this case? Would that also be the case if you dropped the intercept? What will be an ideal response?