. Kindly help me to solve the following attachments.
2. Suppose that the quantity theory of money holds. So, the equation of exchange holds for this economy and money demand (MD) is proportional to nominal income Further, assume that we are in a classical economy in which real output (Y) is fixed by supply- side factors at 10,000 units and the money supply (M,) is fixed at 8000 units. a) Suppose that individuals initially wish to hold a quantity of money balances equal to one-fifth of their nominal income i.e., k = 1/5. Use the money market equilibrium condition to determine the initial equilibrium price level for this economy. b) Now suppose that individuals in this economy increase their money demand and wish to hold money balances equal to one-fourth of their nominal income, i.e., k is now 1/4. With output fixed by supply-side factors at 10,000 units and money supply unchanged at 8000 units how does this increase in money demand affect the equilibrium price level? How would you explain this change in the equilibrium price level? c) Graphically illustrate your answers to parts (a) and (b) in an aggregate demand-aggregate supply graph. For the aggregate demand curve(s), explicitly indicate some of the (P,Y) combinations used to graph the curve(s) on your graph. Also indicate the initial and new equilibria.Class 1 OLS estimators, properties, Gauss-Markov theorem, simple regression 1. A regression of average weekly earnings (AW E, measured in dollars) on age (measured in years) using a randon sample of university-educated full-time workers aged 25-65 yields the following: AWE = 348.3 + 4.8Age, R' - 0.023, SER = 312.1 (a) Explain what the coefficient values 348.3 and 4.8 mean. (b) The regression R" is 0.023. What are the units of measurement for the R? (years? dollars? or is it unit-free?) (c) What are the regression's predicted earnings for a 25-year-old worker? A 45-year-old worker? (d) Will the regression give reliable predictions for a 99-year-old worker? Why or why not? (e) The average age in this sample is 41.6 years. What is the average value of AWE in this sample? 2. Consider simple linear regression model y = 6 + 65, + 6,, where i = 1,..., n, E(e.) = 0, cou(, Es ) = 0'dy, i, j = 1,...,n. There are 5 observations -2 -101 2 y 2 1 3 3 6 Compute the following values a) OLS estimators do # 61; b) Standard Error of Regression (SER); c) estimates for parameters variances; d) point estimation y for r = 3; e) confidence interval of the estimation y for = = 3; [) TSS and RSS; g) R'; h) test the null hypothesis 60 = 0 against 4 / 0; i) construct a confidence interval for the parameter . Significance level a is 0.05.Setup: Imagine, you were hired as economic advisor to the treasury of the fictional country, Krona. The country faces an epidemic of a new viral disease, which is deadly for about 6% of the population. The airborne disease spreads rapidly across the citizens of Krona, because there is no vaccine available yet. As economic advisor your input is crucial to lead the policy response to the outbreak of the illness. 1. The Health Ministry provides some evidence that wearing simple facemasks reduces passing on the disease from an infected to a healthy individual by about 70 percent, but reduces chances for own infection only by 10 percent (when exposed to an infected individual not wearing a mask). a) The government of Krona wants you to explore whether private agents can create markets to price the corresponding externality. Discuss briefly how this might work in theory and in practice. [word limit 200 words; 8 marks]. b) Propose one alternative policy option to address the externality that leads to the optimal level of wearing of face covering. Explain briefly issues around the practical implementation [world limit 200 words; 6 marks]. c) Suppose that some preliminary research finds that wearing of face masks leads to an increase in infections of the individual wearing the face mask. Explain how this result may affect the policy proposed in b). [word limit 200 words; 6 marks].Setup: Imagine, you were hired as economic advisor to the treasury of the fictional country, Krona. The country faces an epidemic of a new viral disease, which is deadly for about 6% of the population. The airborne disease spreads rapidly across the citizens of Krona, because there is no vaccine available yet. As economic advisor your input is crucial to lead the policy response to the outbreak of the illness. 1. The Health Ministry provides some evidence that wearing simple facemasks reduces passing on the disease from an infected to a healthy individual by about 70 percent, but reduces chances for own infection only by 10 percent (when exposed to an infected individual not wearing a mask). a) The government of Krona wants you to explore whether private agents can create markets to price the corresponding externality. Discuss briefly how this might work in theory and in practice. [word limit 200 words; 8 marks]. b) Propose one alternative policy option to address the externality that leads to the optimal level of wearing of face covering. Explain briefly issues around the practical implementation [world limit 200 words; 6 marks]. c) Suppose that some preliminary research finds that wearing of face masks leads to an increase in infections of the individual wearing the face mask. Explain how this result may affect the policy proposed in b). [word limit 200 words; 6 marks].1. [42 points] Suppose that you have an iid random sample {Xi, Y} of three data points (X1, Yl) = (0, 0) ; (X2, Y2) = (2,3); (X3, Y3) = (4,3). (a) (2 point) Calculate the sample mean of X; and Yi. (b) (6 points) You run a simple linear regression of Y, on Xi. Calculate the OLS estimates of the slope and intercept. (c) (3 points) Calculate the predicted value and residuals for each of three data points. (d) (6 points) Calculate the TSS, ESS and SSR. (e) (4 points) Check whether TSS=ESS+SSR and interpret the equation. (f) (3 points) Calculate the R for the regression. (g) (3 points) Interpret R2 in words. (h) (4 points) Calculate the sample covariance between the residuals and Xi, which is defined in general as 1 Et-, (Xi - X)(ui - u), where n is the sample size and u; is the residual. (i) (4 points) Calculate the sample covariance between the residuals and predicted value, which is defined in general as I EL, (Yi - Y)(ui - u), where n is the sample size and Y; is the predicted value. (j) (4 points) Draw a graph to show (1) the three data points (2) the estimated regression line and (3) their residuals. (k) (3 points) Draw the point (X, Y) in the graph above and explain why the point (X, Y) is always on the regression line
