A Vector Autoregression A $k$ Time Series Regressions, in Which the Regressors Are Lagged Values

question 34

Short Answer

A vector autoregression a. is the ADL model with an AR process in the error term.
b. is the same as a univariate autoregression.
c. is a set of $k$ time series regressions, in which the regressors are lagged values of all $k$ series.
d. involves errors that are autocorrelated but can be written in vector format.

Comprehend the role and critiques of discretionary fiscal policy in stabilizing the economy.

Grasp the significance of expectations (rational and otherwise) in influencing the effectiveness of macroeconomic policy.

Evaluate the time-inconsistency problem and its implications for economic policy.

Recognize the potential GDP impacts and challenges of prolonged unemployment.

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Definitions:

Long-Run Cost Curve

A graph showing the lowest cost at which a firm can produce any given level of output in the long run, when all factors of production are variable.

Average Total Cost

The total cost of production (including fixed and variable costs) divided by the number of units produced, indicating the per-unit cost of production.

X-Inefficiency

Inefficiency in an organization's allocation of resources due to a lack of competitive pressure, often leading to higher costs and lower output.

Profit-Maximizing Output

The point of production where a company reaches its maximum profit potential.