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Solved: In the AD/AS model, what prevents the economy from achieving equilibrium at

Principles of Economics | 2nd Edition | ISBN: 9781947172364 | Authors: Steven A. Greenlaw, David Shapiro, Timothy Taylor ISBN: 9781947172364 471

Solution for problem 4 Chapter 24

Principles of Economics | 2nd Edition

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Principles of Economics | 2nd Edition | ISBN: 9781947172364 | Authors: Steven A. Greenlaw, David Shapiro, Timothy Taylor

Principles of Economics | 2nd Edition

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24
4
Problem 4

In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?

Step-by-Step Solution:
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Multicollinearity Multicollinearity When your (independent) variables correlate highly with each other (as they are measuring the same thing) High collinearity increases the likelihood of a type 2 error (so significant difference found when one exists) Multicollinearity Multicollinearity Reduce likelihood of Type 2 error To reduce Multicollinearity can combine highly correlated variables or reduce the number of variables check for multicollinearity What is the 5th step in the model building process multicollinearity What is a condition that occurs when independent variables are correlated with one another collinearity or intercorrelation What are two other names for multicollinearity multicollinearity What exists in virtually all multiple regression models only when two or

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Chapter 24, Problem 4 is Solved
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Textbook: Principles of Economics
Edition: 2
Author: Steven A. Greenlaw, David Shapiro, Timothy Taylor
ISBN: 9781947172364

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Solved: In the AD/AS model, what prevents the economy from achieving equilibrium at