Archives: Solution Manual

CHAPTER 16 | Fiscal Policy Brief Chapter Summary and Learning Objectives The authors use the dynamic aggregate demand-aggregate supply model to discuss fiscal policy in section 16.3 of this chapter. This section is self-contained so you can omit it without […]

CHAPTER 15 | Monetary Policy 367 Extra Economics in Your Life: Should You Hold Bonds or Savings/Checking Accounts? Question: Suppose most of your savings are in bonds and, according to an article in the Wall Street Journal, the Fed announces […]

CHAPTER 15 | Monetary Policy Brief Chapter Summary and Learning Objectives The authors use the dynamic aggregate demand-aggregate model to discuss monetary policy in section 4 of this chapter. This section is self-contained so you can omit it without any […]

CHAPTER 14 | Money, Banks, and the Federal Reserve System 339 If velocity is constant, then the growth rate of velocity is zero. This allows us to rewrite the equation as: Inflation rate = Growth in the money supply – […]

CHAPTER 14 | Money, Banks, and the Federal Reserve System Brief Chapter Summary 14.1 What Is Money, and Why Do We Need It? (pages 858–861) Define money and discuss the four functions of money. ▪ Money is anything that people […]

CHAPTER 13 | Aggregate Demand and Aggregate Supply Analysis 313 Appendix Macroeconomic Schools of Thought (pages 851–854) Learning Objective: Compare macroeconomic schools of thought. Macroeconomics became a separate field of economics in 1936, with the publication of John Maynard Keynes’s […]

CHAPTER 13 | Aggregate Demand and Aggregate Supply Analysis Brief Chapter Summary and Learning Objectives This book takes a fresh approach to the standard aggregate demand and aggregate supply model. There is no good, simple alternative to using the AD-AS […]

286 CHAPTER 12 | Aggregate Expenditure and Output in the Short Run Appendix The Algebra of Macroeconomic Equilibrium (pages 812–813) Learning Objective: Apply the algebra of macroeconomic equilibrium. Graphs and tables are alternative means to illustrate the aggregate expenditure model […]

CHAPTER 12 | Aggregate Expenditure and Output in the Short Run Brief Chapter Summary and Learning Objectives The Keynesian income-expenditure approach (the “45°-line diagram” or “Keynesian cross”) is useful to introduce students to the short-run relationship between spending and production. […]

260 CHAPTER 11 | Long-Run Economic Growth: Sources and Policies record in protecting property rights is offered by X. Zhang, who argues that local Chinese governments engage in vigorous competition for investment that benefits their own jurisdictions. The uncertainty of […]

CHAPTER 11 | Long-Run Economic Growth: Sources and Policies Brief Chapter Summary and Learning Objectives 11.1 Economic Growth over Time and around the World (pages 732–737) Define economic growth, calculate economic growth rates, and describe global trends in economic growth. […]

Chapter 1 Econometrics There are no exercises or applications in Chapter 1. © 2012 Pearson Education, Inc. Publishing as Prentice Hall Chapter 2 The Linear Regression Model There are no exercises or applications in Chapter 2. © 2012 Pearson Education, […]

238 CHAPTER 10 | Economic Growth, the Financial System, and Business Cycles Question Many researchers who have studied presidential elections believe that the state of the economy often plays a large role in the outcome of the election. In particular, […]

Chapter 21 Nonstationary Data ◼ Exercise 1. The autocorrelations are simple to obtain just by multiplying out 2 1 ,, t t t v v v − and so on. The autocovariances are 22 1 2 2 2 2 1 […]

CHAPTER 10 | Economic Growth, the Financial System, and Business Cycles Brief Chapter Summary and Learning Objectives 10.1 Long-Run Economic Growth (pages 696–704) Discuss the importance of long-run economic growth. ▪ The U.S. economy has experienced long-run economic growth due […]

Chapter 20 Serial Correlation ◼ Exercises 1. For the first-order autoregressive model, the autocorrelation is . Consider the first difference, 1, t t t v− =  −  which has Var[vt] = 2Var[t] − 2Cov[(t, 1t−  )] = […]

CHAPTER 9 | Unemployment and Inflation 211 The following figure shows changes in the CPI in the United States during the years between 1925 and 1940. The beginning of the Great Depression in 1929 caused the country to experience severe […]

© 2012 Pearson Education, Inc. Publishing as Prentice Hall lnL = (−n1/2)[ln(2) + ln2] − (1/(22))1(yi − )2 + 0ln(−/). In terms of  and , this is lnL = (−n1/2)[ln(2) − ln2] − (1/2)1(yi − )2 + 0ln(−) = […]

CHAPTER 9 | Unemployment and Inflation Brief Chapter Summary and Learning Objectives 9.1 Measuring the Unemployment Rate, the Labor Force Participation Rate, and the Employment-Population Ratio (pages 658–667) Define the unemployment rate, the labor force participation rate, and the employment– […]

(−), (μ1 − ), (μ2 − ), and (μ3 − ) as the unknown parameters, , , , and , respectively. If we can find estimators of these, we can solve for the underlying parameters. We may write the log […]

Discuss whether GDP is a good measure of well-being. ▪ Shortcomings of GDP as a measure of well-being include: It does not include the value of leisure; it is not adjusted for pollution or other negative effects of production; and […]

Chapter 17 Discrete Choice © 2012 Pearson Education, Inc. Publishing as Prentice Hall convenient approach is to estimate F() and F(). These functions can then be inverted to estimate the original parameters. The invariance of maximum likelihood estimators to transformation […]

162 CHAPTER 7 | Comparative Advantage and the Gains from International Trade Extra Making the Connection The Unintended Consequences of Banning Goods Made with Child Labor In many developing countries, such as Indonesia, Thailand, and Peru, children as young as […]

L(y|) = 1 1 1 exp( ) 1 ( | ) exp( ) . ( 1) ( 1) i ii y n n n y i i i i ii f y n yy      = […]

CHAPTER 7 | Comparative Advantage and the Gains from International Trade Brief Chapter Summary and Learning Objectives 7.1 The United States in the International Economy (pages 286–289) Discuss the role of international trade in the U.S. economy. ▪ The United […]

Chapter 15 Simulation-Based Estimation and Inference and Random Parameter Models ◼ Exercises 1. Exponential: The pdf is f(x) = exp(−x). The CDF is   =  − =  − − − − − = − −   […]

CHAPTER 6 | Firms, the Stock Market, and Corporate Governance 135 Going Deeper into Financial Statements Key sources of information about a corporation’s profitability and financial position are its principal financial statements—the income statement and the balance sheet. A. Analyzing […]

Therefore, the expected value is E[z] = 1 0 [ / ] [ /( 1)][ / ] /( 1). n n n E z z dz n n n n +  =  +  =  +  […]

CHAPTER 6 | Firms, the Stock Market, and Corporate Governance Brief Chapter Summary and Learning Objectives 6.1 Types of Firms (pages 252–256) Categorize the major types of firms in the United States. ▪ There are three legal categories of firms: […]

Chapter 13 Minimum Distance Estimation and the Generalized Method of Moments ◼ Exercises 1. The elements of J are −−       = − = =    2 3 4 2 2 2 32 […]

countries. ▪ In many countries the government supplies health care directly or pays for most health care expenses. This complicates cross-country comparisons of health care outcomes. ▪ Health care spending per person in the United States is higher than in […]

failures of the assumptions of the parametric model. Consider, for example, the binary probit model of Chapter 21, which makes a strong assumption of normality and homoscedasticity. If the assumptions are correct, the probit estimator is the most efficient use […]

88 CHAPTER 4 | Economic Efficiency, Government Price Setting, and Taxes 2.5 You should disagree. The first part of the statement is correct, but second part is incorrect. If marginal cost is greater than marginal benefit, reducing output would increase […]

ˆ y = − 0.747476 + 1.058959x, ee = 120.6687 (0.95595) (0.058656) Chapter 11 Models for Panel Data ◼ Exercises 1. The pooled least squares estimator is ˆ y = −1.4684i1 − 2.8362i2 + 0.12166i3 + 1.102192x ee = 79.183 […]

CHAPTER 4 | Economic Efficiency, Government Price Setting, and Taxes Brief Chapter Summary and Learning Objectives 4.1 Consumer Surplus and Producer Surplus (pages 110–114) Distinguish between the concepts of consumer surplus and producer surplus. ▪ Consumer surplus measures the dollar […]

86 Greene • Econometric Analysis, Seventh Edition Applications 1. By adding the share equations vertically, we find the restrictions 1 + 2 + 3 = 1 11 + 12 + 13 = 0 12 + 22 + 23 = 0 […]

58 CHAPTER 3 | Where Prices Come From: The Interaction of Demand and Supply d. The information on nutrition may well cause at least some consumers to decide to eat healthier food, so the demand curve for Big Macs will […]

Chapter 10 Systems of Equations ◼ Exercises 1. The model can be written as 11 22 .       =+             yi yi Therefore, the […]

CHAPTER 3 | Where Prices Come From: The Interaction of Demand and Supply Brief Chapter Summary and Learning Objectives 3.1 The Demand Side of the Market (pages 74–82) List and describe the variables that influence demand. ▪ The most important […]

Appendix E Computation and Optimization ◼ Exercises 1. Show how to maximize the function 2 ( ) /2 1 () 2 c fe − − =  d f ()/d = 2 ( ) /2 1 2 c e− − […]

Describe comparative advantage and explain how it serves as the basis for trade. ▪ Comparative advantage is the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers. Copyright […]

Appendix D Large-Sample Distribution Theory There are no exercises for Appendix D. © 2012 Pearson Education, Inc. Publishing as Prentice Hall

Instructor’s Manual with Solutions Manual R. Glenn Hubbard Anthony Patrick O’Brien MACROECONOMICS SIXTH EDITION R. Glenn Hubbard Chapter 3: Where Prices Come From: The Interaction of Demand and Supply 44 Chapter 4: Economic Efficiency, Government Price Setting, and Taxes 72 […]

Appendix C Estimation and Inference ◼ Exercises 1. The following sample is drawn from a normal distribution with mean  and standard deviation : x = 1.3, 2.1, 0.4, 1.3, 0.5, 0.2, 1.8, 2.5, 1.9, 3.2. Compute the mean, median, […]

CHAPTER 1 | Economics: Foundations and Models 13 D. Determining Cause and Effect Inferring cause and effect relationships by observing graphs can lead to incorrect conclusions. One reason for this is that there may be an omitted variable that is […]

© 2012 Pearson Education, Inc. Publishing as Prentice Hall Appendix B Probability and Distribution Theory ◼ Exercises 1. How many different 5-card poker hands can be dealt from a deck of 52 cards? There are 48(13) possible hands containing 4 […]

CHAPTER 1 | Economics: Foundations and Models Brief Chapter Summary and Learning Objectives 1.1 Three Key Economic Ideas (pages 4–8) Explain these three key economic ideas: People are rational; people respond to economic incentives; and optimal decisions are made at […]

Appendix A Matrix Algebra ◼ Exercises 1. For the matrices A = 1 3 3 2 4 1    and B =  AB = , 23 25 14 30    BA = , 10 22 […]

Chapter 9 The Generalized Regression Model and Heteroscedasticity ◼ Exercises 1. Write the two estimators as ˆ  =  + (X−1X)−1X−1 and b =  + (XX)−1X. Then, ( ˆ  − b) = [(X−1X)−1X−1 − (XX)− 1X]  […]

Chapter 8 Endogeneity and Instrumental Variable Estimation ◼ Exercises 1. There is no need for a separate proof different from the usual for OLS. Formally, however, it follows from the results at (8-4) that −      […]