The following equations represent a simultaneous equations model:
K1= 
1K2+ 
1z1 + u1
K2= 2K1+ 2z2 + u2
OLS will suffer from simultaneity bias if:
A. u1 is correlated with z1.
B. z1 is correlated with z2.
C. K2 is correlated with u1.
D. K1 is correlated with u1.
Answer: C
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Consider three imaginary countries. In Aire, saving amounts to $4,000 and consumption amounts to $12,000; in Bovina, saving amounts to $3,000 and consumption amounts to $24,000; and in Cartar, saving amounts to $10,000 and consumption amounts to $50,000 . The saving rate is
a. higher in Aire than in Cartar, and it is higher in Cartar than in Bovina. b. higher in Cartar than in Aire, and it is higher in Aire than in Bovina. c. higher in Cartar than in Bovina, and it is the same in Bovina and Aire. d. higher in Aire than in Bovina, and it is the same in Aire and Cartar.
Which of the following is the so-called efficiency factor of economic growth?
A. Having an efficient financial system B. Reaching full production potential C. Having free trade D. Enhanced quantity and quality of human resources