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Exam 2 2009

# Exam 2 2009 - Exam 2A Please use the data set Exam2 Demand...

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Exam 2A Please use the data set Exam2 – Demand for Money.xls for all analyses. Variables in the Excel spreadsheet are for the years 1960-1983 and are defined as follows: GNP – the U.S. Gross National Product in billions of dollars. M1 – U.S. demand for money in billions of dollars. TBillR – Treasury Bill Rate in percent. 1. Before you do anything, save the Excel spreadsheet in the Dropbox as “ yourlastname Exam2.xls .” Then click the “Save” icon often as you work. We have had crashes in the lab, and we are under time constraints. 2. These data will be used to estimate a demand function for money for the U.S. The demand for money should be affected by both the cost of holding money (a price of money – T-Bill Rates) and a measure of income for the economy (GNP): 0 1 2 t t t t M1 TBillR GNP u β β β = + + + (5) a. Every regression model has certain parts. For the model above, explain/name each of the elements (i.e., what are: M1, the β s, TBillR , and u ?) (4) b. Before completing any analyses, what

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