Question
In a multiple linear regression model, the presence of
perfect multicollinearity among the explanatory variables will primarily result in which of the following issues?Solution
Solution: · Multicollinearity refers to a high linear correlation among two or more independent variables. · Perfect Multicollinearity means one explanatory variable is an exact linear function of one or more others (e.g., X2=2X1+5). · Mathematical Result: OLS requires calculating (X′X)−1, the inverse of the matrix of sums of squares and cross-products of the regressors. Perfect multicollinearity makes the X′X matrix singular (its determinant is zero), meaning its inverse (X′X)−1 does not exist. Without this inverse, the OLS estimators (β^=(X′X)−1X′y) cannot be computed or are undefined.
The "liquidity trap" refers to a situation where:
If price of all commodities rise in the same proportion then,
Expansionary fiscal policy in the classical model will cause aggregate demand to-----potential output?
Which school of economic thought suggested that one possible cause of inflation was a ‘push’ from the cost side?
The 'Trickle-Down Theory' in economics is most associated with the effects of:
In two commodity worlds if one good is inferior then the other must be
When the slope of average cost is negative then which of the following holds true?
What is the Capital to RiskWeighted Assets Ratio (CRAR) of scheduled commercial banks (SCBs) as of end March 2024 according to the Financial Stability R...
The concept of vicious circle of poverty is associated with
If the total revenue from sales of X is given by the equation R=100Q-2Q^2. What is the point elasticity of demand when MR=20
