Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter D, Problem 16RQ
Exercise D16
Why are savings, taxes, and imports referred to as “leakages” in calculating the multiplier effect?
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TABLE 12.1
| Two Stage Least Squares Estimates of the Demand for Cigarettes Using
Panel Data for 48 U.S. States
Dependent variable: In(Qfte) – In(Qfte)
cigarettes
Regressor
(1)
(2)
(3)
In(Peisarettes) - In(Pçigarettes
-0.94**
-1.34**
-1.20**
i,1995
i,1985
(0.21)
(0.23)
(0.20)
In(Inc;1995) – In(Inc;1985)
0.53
(0.34)
0.43
(0.30)
0.46
(0.31)
Intercept
-0.12
-0.02
-0.05
(0.07)
(0.07)
(0.06)
Both sales tax and
Instrumental variable(s)
Sales tax
Cigarette-specific tax
cigarette-specific tax
First-stage F-statistic
33.70
107.20
88.60
Overidentifying restrictions
J-test and p-value
4.93
(0.026)
These regressions were estimated using data for 48 U.S. states (48 observations on the 10-year differences). The data are
described in Appendix 12.1. The J-test of overidentifying restrictions is described in Key Concept 12.6 (its p-value is given in
parentheses), and the first-stage F-statistic is described in Key Concept 12.5. Individual coefficients are statistically significant at
the *5%…
Chapter D Solutions
Principles of Economics 2e
Ch. D - Exercise D6 What is on the axes of an...Ch. D - Exercise D7 What does the 45-degree line show?Ch. D - Exercise D8 What determines the slope of a...Ch. D - Exercise D9 What is the marginal propensity to...Ch. D - Exercise D10 Why are the investment function, the...Ch. D - Exercise D11 Why does the import function slope...Ch. D - Exercise D12 What are the components on which the...Ch. D - Exercise D13 Is the equilibrium in a Keynesian...Ch. D - Exercise D14 What is an inflationary gap? A...Ch. D - Exercise D15 What is the multiplier effect?
Ch. D - Exercise D16 Why are savings, taxes, and imports...Ch. D - Exercise D17 Will an economy with a high...Ch. D - Exercise D18 How do economists use the multiplier?Ch. D - Exercise D19 What does it mean when the aggregate...Ch. D - Exercise D20 Which model, the AD/AS or the AE...Ch. D - Exercise D21 What are some reasons that the...Ch. D - Exercise D22 What should the government do to...Ch. D - Exercise D23 Two counties are in a recession....Ch. D - Exercise D24 Compare two policies: a tax cut on...Ch. D - Exercise D25 What role does government play in...Ch. D - Exercise D26 If there is a recessionary gap of 100...Ch. D - Exercise D27 What other changes in the economy can...
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Similar questions
- Exercise D17 Will an economy with a high multiplier be more stable or less stable than an economy with a low multiplier in response to changes in the economy or in government policy?arrow_forwardExercise D27 What other changes in the economy can be evaluated using the multiplier?arrow_forwardExercise B8 Does the income effect involve a change in income? Explain.arrow_forward
- Exercise D11 Why does the import function slope down? What is the marginal propensity to import?arrow_forwardExercise D6 What is on the axes of an expenditure-output diagram?arrow_forwardExercise D26 If there is a recessionary gap of 100 billion, should the gamut increase spending by 100 billion to close the gap? Why? Why not?arrow_forward
- Exercise D14 What is an inflationary gap? A recessionary gap?arrow_forwardExercise D22 What should the government do to relieve inflationary pressures if the aggregate expenditure is greater than potential GDP?arrow_forwardExercise D21 What are some reasons that the economy might be in a recession, and what is the appropriate government action to alleviate the recession?arrow_forward
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