Which Criticism of Dickey-Fuller (DF) -Type Tests Is Addressed by Stationarity

question 6

Multiple Choice

Which criticism of Dickey-Fuller (DF) -type tests is addressed by stationarity tests, such as the KPSS test?

• A) DF tests have low power to reject the null hypothesis of a unit root, particularly in small samples.
• B) DF tests are always over-sized.
• C) DF tests do not allow the researcher to test hypotheses about the cointegrating vector.
• D) DF tests can only find at most one cointegrating relationship.

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Definitions:

Elastic

Describes a situation where the quantity demanded or supplied of a good or service changes significantly when its price changes.

Imperfectly Competitive Market

A market structure where the assumptions of perfect competition, such as identical products and many buyers and sellers, are not fully met.

Imperfectly Competitive

Describes markets where individual sellers can influence prices and terms of trade, contrary to perfect competition.

Purely Competitive

A market structure characterized by many sellers offering identical products, with no single seller able to influence market price.