Suppose That We Have the Following Results from a Model

question 2

Multiple Choice

Suppose that we have the following results from a model with lagged dependent variable
Y_it = 0.9Y_i,t-1 + 2X_1it
Which of the following is most accurate?

• A) The short-term effect of a one unit change in X will be a 2.9 unit change in Y.
• B) The long-term effect of a one unit change in X will be a 20 unit change in Y.
• C) The long-term effect of a one unit change in X will be a 4 unit change in Y.
• D) Y will keep getting smaller and smaller over time.

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Definitions:

Financial Statement Column(s)

Sections in financial statements displaying specific types of financial data, such as assets, liabilities, revenues, and expenses.

Net Income

The remaining income of a corporation after deducting all expenditures and tax obligations from the income.

Owner's Capital

The total amount of money and assets invested in a company by its owner or shareholders.

Income Statement

A financial document that summarizes a company's revenues, expenses, and profits over a specific period.