The Major Shortcoming of the General Linear Probability Model Y

question 59

Multiple Choice

The major shortcoming of the general linear probability model y = β₀ + β₁x₁ + β₂x₂ + ∙∙∙+ β_kx_1k + ε,is that the predicted values of y can be sometimes

• A)greater than 0 and less than 1.
• B)at least 0 and no more than 1.
• C)less than 1 but more than 0.
• D)less than 0 or greater than 1.

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Definitions:

Inflation Expectations

Inflation expectations are the rate at which people—consumers and investors—expect the general level of prices to change in the future.

Unemployment Rate

The portion of the labor market that consists of people who are jobless and actively on the lookout for work.

Favorable Supply Shock

An unexpected event that increases the supply of a good or service, leading to a lower equilibrium price.

Short-run Phillips Curve

A graphical representation showing an inverse relationship between the rate of unemployment and the rate of inflation in the short-term.