Why can we not use first differences when we have independent cross sections in two years (as opposed to panel data)?

Logarithms are especially useful for comparing series with two divergent scales since 10 percent growth always looks the same, regardless of the starting level. When absolute levels matter, the raw data are more appropriate, but when growth rates are whats important, log scales are better.

Exercise B11 Which is larger, the income effect or the substitution effect?

Exercise D21 What are some reasons that the economy might be in a recession, and what is the appropriate government action to alleviate the recession?

Exercise D22 What should the government do to relieve inflationary pressures if the aggregate expenditure is greater than potential GDP?

Exercise A5 How does the appearance of positive slope differ from negative slope and from zero slope?

Exercise D10 Why are the investment function, the government spending function, and the export function all drawn as flat lines?

Exercise B6 What is a substitution effect?

Savings-Mart (a chain of discount department stores) sells patio and lawn furniture. Sales are seasonal, with higher sales during the spring and summer quarters and lower sales during the fall and winter quarters. The company developed the following quarterly sales forecasting model: Y t=8.25+0.125t2.75D1t+3.50D3t where Y t=predictedsales(million)inquartert 8.25=quarterlysales(million)whent=0 t=timeperiod(quarter)wherethefourthquarterof2002=0,firstquarterof2003=1,secondquarterof2003=2,... D1t={1forfirst-quarterobservations0otherwiseD2t={1forsecond-quarterobservations0otherwiseD3t={1forthird-quarterobservations0otherwise Forecast Savings-Marts sales of patio and lawn furniture for each quarter of 2010.

Exercise B2 Why do indifference curves slope down?