Economics

Economics 1. Exogenous variables are those which are determined outside a model. In our model we have exogenous variable just Government Spending (G). Endogenous variable are variable determined inside a model. In our model we have endogenous variable Income Y, Consumption C, Investment I, Net Exports X, and Money multiplier M. 2. Closed economy model there is just income Y, and consumption C inside the model, it means that, these variables are endogenous, but Investment I, net exports and government spending G are outside the model and they are exogenous. Model would look like this: Y = a+b (1-t) Y+G +X and the multiplier will be: 1 1-b(1-t) In the open economy model there is more endogenous variables than just Income Y, and consumption C. For example Net exports X can be endogenous variable: X =g-mY and the multiplier in this case would be: 1 1-b (1-t)+m The multiplier for the open economy model is smaller because we have to add the denominator the model, change, increase, money, spending, multiplier, government, variable, endogenous, net, because, rate, number, k/hdn, investment, interest, exports, effect, economy, dn, denominator, b2a, 1-t, ye, smaller, ky, income, goods, exogenous, demand, consumption, aeg, 3200, yead, variables, offset, negative, just, inside, gs, gdp, export, expensive, dn, determined, solve, rise