(Requires Appendix Material) the Relationship Between the TSLS Slope and the Corresponding

question 36

Multiple Choice

(requires Appendix material) The relationship between the TSLS slope and the corresponding population parameter is:

• A) \(\left( \hat { \beta } _ { 1 } ^ { \text {TSLS } } - \beta _ { 1 } \right) = \frac { \frac { 1 } { n } \sum _ { i = 1 } ^ { n } \left( Z _ { i } - \bar { Z } \right) u _ { i } } { \frac { 1 } { n } \sum _ { i = 1 } ^ { n } \left( Z _ { i } - \bar { Z } \right) \left( X _ { i } - \bar { X } \right) } .\)
• B) \(\left( \hat { \beta } _ { 1 } ^ { \text {TSLS } } - \beta _ { 1 } \right) = \frac { \frac { 1 } { n } \sum _ { i = 1 } ^ { n } \left( Z _ { i } - \bar { Z } \right) } { \frac { 1 } { n } \sum _ { i = 1 } ^ { n } \left( Z _ { i } - \bar { Z } \right) \left( X _ { i } - \bar { X } \right) } .\)
• C) \(\left( \hat { \beta } _ { 1 } ^ { T S L S } - \beta _ { 1 } \right) = \frac { \frac { 1 } { n } \sum _ { i = 1 } ^ { n } \left( Z _ { i } - \bar { Z } \right) u _ { i } } { \frac { 1 } { n } \sum _ { i = 1 } ^ { n } \left( Z _ { i } - \bar { Z } \right) ^ { 2 } } .\)
• D) \(\left( \hat { \beta } _ { 1 } ^ { \text {TSLS } } - \beta _ { 1 } \right) = \frac { \frac { 1 } { n } \sum _ { i = 1 } ^ { n } \left( X _ { i } - \bar { X } \right) u _ { i } } { \frac { 1 } { n } \sum _ { i = 1 } ^ { n } \left( Z _ { i } - \bar { Z } \right) \left( X _ { i } - \bar { X } \right) }\)

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Definitions:

MPC

The marginal propensity to consume, which measures the proportion of additional income that a consumer spends on goods and services instead of saving.

Aggregate Demand

The total demand for all goods and services in an economy at different price levels, during a specific time period, including consumption, investment, government spending, and net exports.

Employment Act

A piece of legislation aimed at promoting high employment levels, economic growth, and stable prices within an economy.

Monetary Policy

The process by which the central bank, or monetary authority of a country, controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.