Question: As an exercise to gain familiarity with the 2SLS program on your computer, take the data provided for the simple Keynesian model in Section 14.3,

As an exercise to gain familiarity with the 2SLS program on your computer, take the data provided for the simple Keynesian model in Section 14.3, and:

a. Estimate the investment function with OLS.

b. Estimate the reduced form for Y with OLS.

c. Substitute the Ŷ from your reduced form into the investment function and run the second stage yourself with OLS.

d. Estimate the investment function with your computer’s 2SLS program (if there is one) and compare the results with those obtained in part c.

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