A Model That Attracted Quite a Bit of Interest in Macroeconomics

question 15

Essay

A model that attracted quite a bit of interest in macroeconomics in the 1970s was the St. Louis model. The underlying idea was to calculate fiscal and monetary impact and long run cumulative dynamic multipliers, by relating output (growth)to government expenditure (growth)and money supply (growth). The assumption was that both government expenditures and the money supply were exogenous. Estimation of a St. Louis type model using quarterly data from 1960:I-1995:IV results in the following output (HAC standard errors in parenthesis):
where ygrowth is quarterly growth of real GDP, mgrowth is quarterly growth of real money supply (M2), and ggrowth is quarterly growth of real government expenditures. "d" in front of ggrowth and mgrowth indicates a change in the variable.
(a)Assuming that money and government expenditures are exogenous, what do the coefficients represent? Calculate the h-period cumulative dynamic multipliers from these. How can you test for the statistical significance of the cumulative dynamic multipliers and the long-run cumulative dynamic multiplier?
(b)Sketch the estimated dynamic and cumulative dynamic fiscal and monetary multipliers.
(c)For these coefficients to represent dynamic multipliers, the money supply and government expenditures must be exogenous variables. Explain why this is unlikely to be the case. As a result, what importance should you attach to the above results?

Describe the Ebbinghaus forgetting curve and its implications for memory over time.

Discuss the physiological foundations of memory, including memory traces and changes in the brain.

Understand the concept of motivated forgetting and defense mechanisms related to memory.

Assess how prior learning impacts the acquisition and recall of new information.

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Definitions:

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

Capital Budgeting

The process of evaluating and selecting long-term investments that are consistent with the firm's goal of wealth maximization.

After-Tax Cost

The net cost of a transaction or investment after the effects of taxes are considered, often used in analyzing the cost of financing options.

Specific Capital

This refers to the various types of capital (debt, equity, etc.) a company uses for financing its operations and investments, with each type having its own cost and characteristics.