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Consider the lawsch85 dataset from the wooldridge package in R(you can load this dataset using data(lawsch85) after loading the wooldridge package)

Economics

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Consider the lawsch85 dataset from the wooldridge package in R(you can load this dataset using data(lawsch85) after loading the wooldridge package). Using R, estimate the following equation: Isalary = Bo + BILSAT + B2GPA+ +B3lcost + Bullibvol +u Using a 1% level of significance, test the hypothesis: Ho : B4 = B2 = 0 H1:34 # 0orB2 € 0 What is the F statistic associated with this test? Round your answer to two decimal places. Consider the lawsch85 dataset from the wooldridge package in R(you can load this dataset using data(lawsch85) after loading the wooldridge package). Using R, estimate the following equation: Isalary = Bo + B1LSAT + B2GPA+ +B3lcost + Ballibvol +u Using a 1% level of significance, test the hypothesis: H. : B2 = 1 H¡ :B2 #1 What is the t statistic associated with this test? (Note that at statistic is different from an F statistic, and note that it is possible for your answer to be a negative number.) Round your answer to two decimal places.

Suppose that the consumption function for the economy is: C = 200 + 0.75(Y-T) The investment function is: I = 500 - 10r Government Spending is equal to 450 and the government runs a balanced budget. Output is equal to 3,050. a) What is the real interest rate for this economy? What share of output is spent on consumption? b) What is the effect of a deficit financed tax cut on consumption, investment, the real interest rate, government spending and output? Use a diagram with savings and investment on the horizontal axis and the real interest rate on the vertical axis in your answer. c) Now suppose that taxes are equal to: T = 0.4Y This is different than the case studied in class because taxes are proportional to income. What is the equilibrium real interest rate in this economy? Is the government running a surplus or a deficit? d) Suppose that the Central Bank successfully implements an inflation targeting regime. What is the effect of the deficit financed tax cut from part b) on the demand for real money balances? Please attach up to two files showing your work.