1. (14 points) Let gprice be the quarterly growth rate in average prices, and let gwage be the growth rate in quarterly wages. Consider the time-series regression model below, with standard errors in parentheses. gprice, = -0.00093 + 0.119gwage, + 0.097 gwaget-1 +0.040gwaget-2 + 0.038gwaget-3 +0.016gwaget-4 (0.00057) (0.052) (0.039) (0.016) (0.022) (0.010) a) If the economy experienced a transitory shock to gwage, when (contemporaneous or at what lag) would the shock have the largest impact on gprice? Briefly explain your answer. b) If the economy experienced a permanent shock to gwage, calculate the long-run propensity (i.e., the cumulative effect) of this shock. c) What modeling concern and assumption would you worry most about being violated in a time-series regression model like the one above? Briefly explain what it means to violate this assumption