Question: Comment on the following. In a study on the demand for money, an economist regressed real cash balances on permanent income. To test whether the

Comment on the following. In a study on the demand for money, an economist regressed real cash balances on permanent income. To test whether the interest rate had been omitted, she regressed the residual from this regression on the interest rate and found that the coefficient was not significantly different from zero. She therefore concluded that the interest rate does not belong in the demand for money function..

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