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(d) Consider the following basic macroeconomic model: Yt=0+1yt1+2It+1tIt=3+4yt+5Qt+2tCt=6+7yt+8Ct1+9Pt+3tQt=10+11Qt1+12Rt+4t Where: Y=nationalincomeC=personalconsumptionI=capitalformationQ=profitsP=costoflivingR=industrialproductiont=timeu=stochasticdisturbances (i) Which of the variables are endogenous and which are exogenous? Make sure to also
(d) Consider the following basic macroeconomic model: Yt=0+1yt1+2It+1tIt=3+4yt+5Qt+2tCt=6+7yt+8Ct1+9Pt+3tQt=10+11Qt1+12Rt+4t Where: Y=nationalincomeC=personalconsumptionI=capitalformationQ=profitsP=costoflivingR=industrialproductiont=timeu=stochasticdisturbances (i) Which of the variables are endogenous and which are exogenous? Make sure to also include the lagged variables in your answer. (ii) What could be the reason for including the variable P (cost of living) in the (101/2=5) consumption function? (d) Consider the following basic macroeconomic model: Yt=0+1yt1+2It+1tIt=3+4yt+5Qt+2tCt=6+7yt+8Ct1+9Pt+3tQt=10+11Qt1+12Rt+4t Where: Y=nationalincomeC=personalconsumptionI=capitalformationQ=profitsP=costoflivingR=industrialproductiont=timeu=stochasticdisturbances (i) Which of the variables are endogenous and which are exogenous? Make sure to also include the lagged variables in your answer. (ii) What could be the reason for including the variable P (cost of living) in the (101/2=5) consumption function
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