Consider the following demand function for money in the United States for the period 19801998: M t
Question:
Mt = β1 Yβ2t rβ3t eut
where M = real money demand, using the M2 definition of money
Y = real GDP
r = interest rate
To estimate the above demand for money function, you are given the data in the following table.
a. Given the data, estimate the above demand function. What are the income and interest rate elasticities of demand for money?
b. Instead of estimating the above demand function, suppose you were to fit the function (M/Y)t = α1rtα2eut. How would you interpret the results? Show the necessary calculations.
Transcribed Image Text:
Observation GDP M2 CPI LTRATE TBRATE 11.27 1980 2795.6 1600.4 82.4 11.506 90.9 14.029 1981 3131.3 1756.1 13.45 1982 10.686 3259.2 1911.2 96.5 99.6 12.76 1983 3534.9 2127.8 11.18 8.630 1984 3932.7 103.9 12.41 2311.7 9.580 1985 4213.0 2497.4 107.6 10.79 7.480 7.78 1986 4452.9 2734.0 109.6 5.980 5.820 1987 4742.5 2832.8 113.6 8.59 1988 5108.3 2995.8 118.3 8.96 6.690 124.0 1989 5489.1 3159.9 8.45 8.120 1990 5803.2 3279.1 130.7 8.61 7.510 1991 3379.8 5986.2 136.2 8.14 5.420 3.450 3.020 1992 6318.9 3434.1 140.3 7.67 144.5 148.2 6642.3 1993 3487.5 6.59 7.37 1994 7054.3 3502.2 4.290 1995 7400.5 3649.3 152.4 6.88 5.510 1996 7813.2 3824.2 156.9 6.71 5.020 8300.8 1997 4046.7 160.5 6.61 5.070 4401.4 163.0 5.58 1998 8759.9 4.810
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 66% (15 reviews)
a The regression results are as follows ln M 2 12394 05243ln RGDP 00255lnTbrate se 06244 01445 00513 ...View the full answer
Answered By
Saikumar Ramagiri
Financial accounting:- Journal and ledgers, preparation of trail balance and adjusted trail balance Preparation of income statement, retained earning statement and balance sheet Banks reconciliation statements Financial statement analysis Cash flow statement analysis (both direct and indirect methods) All methods of Depreciations Management Accounting:- Ratios Budgeting control Cash budget and production budget Working capital management Receivable management Costing:- Standard and variance costing Marginal costing and decision making Cost-volume-profit analysis Inventory management (LIFO, FIFO) Preparation and estimation of cost sheet Portfolio management:- Calculation of portfolio standard deviation or risk Calculation of portfolio expected returns CAPM, Beta Financial management:- Time value of money Capital budgeting Cost of capital Leverage analysis and capital structure policies Dividend policy Bond value calculations like YTM, current yield etc International finance:- Derivatives Futures and options Swaps and forwards Business problems Finance problems Education (mention all your degrees, year awarded, Institute/University, field(s) of major): Education Qualification Board/Institution/ University Month/Year of Passing % Secured OPTIONALS/ Major ICWAI(inter) ICWAI inter Pursuing Pursuing - M.com(Finance) Osmania University June 2007 65 Finance & Taxation M B A (Finance) Osmania University Dec 2004 66 Finance & Marketing. B.Com Osmania University June 2002 72 Income Tax, Cost & Mgt, Accountancy, Auditing. Intermediate (XII) Board of Intermediate May 1999 58 Mathematics, Accountancy, Economics. S S C (X) S S C Board. May 1997 74 Mathematics, Social Studies, Science. Tutoring experience: • 10 year experience in online trouble shooting problems related to finance/accountancy. • Since 6 Years working with solution inn as a tutor, I have solved thousands of questions, quick and accuracy Skills (optional): Technical Exposure: MS Office, SQL, Tally, Wings, Focus, Programming with C Financial : Portfolio/Financial Management, Ratio Analysis, Capital Budgeting Stock Valuation & Dividend Policy, Bond Valuations Individual Skills : Proactive Nature, Self Motivative, Clear thought process, Quick problem solving skills, flexible to complex situations. Achievements : 1. I have received an Award certificate from Local Area MLA for the cause of getting 100% marks in Accountancy during my Graduation. 2. I have received a GOLD MEDAL/Scholarship from Home Minister in my MBA for being the “Top Rank student “ of management institute. 3. I received numerous complements and extra pay from various students for trouble shooting their online problems. Other interests/Hobbies (optional): ? Web Surfing ? Sports ? Watching Comics, News channels ? Miniature Collection ? Exploring hidden facts ? Solving riddles and puzzles
4.80+
391+ Reviews
552+ Question Solved
Related Book For
Question Posted:
Students also viewed these Business questions
-
The demand for chicken in the United States, 19601982. To study the per capita consumption of chicken in the United States, you are given the data in the following table, where Y = per capita...
-
The demand for roses. The following table gives quarterly data on these variables: Y = quantity of roses sold, dozens X 2 = average wholesale price of roses, $/dozen X 3 = average wholesale price of...
-
You are given the data in Table 2.7 for the United States for years 19802006. a. Plot the male civilian labor force participation rate against male civilian unemployment rate. Eyeball a regression...
-
Understanding the history and background of your company gives you valuable insights as to what to do and what not to do going forward. A brief written summary of the background and history of the...
-
Project LMK requires an initial outlay of $500,000 and has a profitability index of 1.4. The project is expected to generate equal annual cash flows over the next ten years. The required return for...
-
The cotton aphid poses a threat to cotton crops in Iraq. The accompanying data on y = infestation rate (aphids/100 leaves) x1 = mean temperature (C) x2 = mean relative humidity appeared in the...
-
A small fan moves air at a mass flowrate of \(0.004 \mathrm{lbm} / \mathrm{s}\). Upstream of the fan, the pipe diameter is 2.5 in., the flow is laminar, the velocity distribution is parabolic, and...
-
A natural gas containing 95 mole% methane and the balance ethane is burned with 20.0% excess air. The stack gas which contains no unburned hydrocarbons or carbon monoxide leaves the furnace at 900?C...
-
Create a MATLAB script that generates a scatter plot for the given data points and labels the axes appropriately. x = [ 1 , 2 , 3 , 4 , 5 ] y = [ 2 , 4 , 1 , 3 , 5 ] The data points are provided in...
-
A five-year project has a projected net cash flow of $15,000, $25,000, $30,000, $20,000, and $15,000 in the next five years. It will cost $50,000 to implement the project. If the required rate of...
-
Determine in each of the following cases if the function in the first column is an eigenfunction of the operator in the second column. If so, what is the eigenvalue? a. b. c. 1 cose sin e- sin e de...
-
Show that 2 and 3 in Eq. (7.9.2) do, in fact, give output elasticities of labor and capital.
-
Western Glassworks (WG) produces leaded crystal glassware. Recently, WG received an unexpected order from a customer that wanted WG to design and produce 100 leaded glass pitchers that the customer...
-
Gonzales determined that Company A had an operating cycle of 100 days in 20X2, whereas Company D had an operating cycle of 145 days for the same fiscal year. This means that: A. Company Ds inventory...
-
The most likely tax environment in which Wilson Papers shareholders would prefer that Wilson repurchase its shares (share buybacks) instead of paying dividends is one in which: A. the tax rate on...
-
Consider the following estimated area response model for sugar cane (area of sugar cane planted in thousands of hectares in a region of Bangladesh), as a function of relative price (100 times the...
-
The following three investment opportunities are available. The returns for each investment for each year vary, but the first cost of each is $20,000. Based on a future worth analysis, which...
-
Based on Exhibits A and B, the current after-tax cost of debt for MBG is closest to: A. 2.80%. B. 5.20%. C. 7.65%. Barbara Andrade is an equity analyst who covers the entertainment industry for...
-
The 3.0-V flashlight bulb and wire loop assembly of Problem 62 is now attached to a wooden dowel with a crank handle as shown in Figure P21.63, and the loop is rotated in a uniform magnetic field of...
-
When the concentration of a strong acid is not substantially higher than 1.0 10-7 M, the ionization of water must be taken into account in the calculation of the solution's pH. (a) Derive an...
-
Clearly differentiate between a warehouse and a distribution center. Explain how a specific product would be handled differently by each.
-
If a retailer operates only from a website and ships all orders by UPS, is it freed from the logistics issues that face traditional retailers? Explain your thinking.
-
ProtoCompany has been producing various items made of plastic. It recently added a line of plain plastic cards that other firms (such as banks and retail stores) will imprint to produce credit cards....
-
How do change interventions leverage advanced methodologies such as appreciative inquiry, design thinking, and complexity science to foster a holistic understanding of change dynamics, unlock latent...
-
what extent do change interventions leverage digital technologies, data analytics, and artificial intelligence to enhance change effectiveness, monitor change progress, and facilitate real-time...
-
Consider a project that requires spending of $15,000 immediately and generates $6,000 per year for the next 4 years (assume each $6,000 comes at the end of each year).What is the NPV of this project?...
Study smarter with the SolutionInn App