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Suppose that ceteris paribus, the optimal amount of capital stock(Y*) needed in an economy to produce a given level of output is : Y* = β1 + β2 Xt + ut. Because the optimum level of capital is not observable directly, it is assumed that the partial adjustment process takes place in the following way: Yt - Yt-1 = γ(Yt* - Yt-1). Which of the following is the expression for the short run effect of X on Y?

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MCQs on Econometrics, which is the use of statistical methods to develop theories or test existing hypotheses in economics or finance. 
 


Suppose that ceteris paribus, the optimal amount of capital stock(Y*) needed in an economy to produce a given level of output is : Y* = β<sub>1</sub> + β<sub>2</sub> X<sub>t </sub>+ u<sub>t</sub>. Because the optimum level of capital is not observable directly, it is assumed that the partial adjustment process takes place in the following way: <br/>Y<sub>t </sub>- Y<sub>t-1 </sub>= γ(Y<sub>t</sub><sup>* </sup>- Y<sub>t-1</sub>). Which of the following is the expression for the short run effect of X on Y?






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