Podcast Beta
Questions and Answers
Eq.1 is an equilibrium condition and is always true by definition. (Eq.2) 𝐶𝑡 = 𝑎1 + 𝑎2𝑌𝑡 + 𝜀1𝑡 ▸ states that aggregate ______ depends on national income.
consumption
(Eq.3) 𝐼𝑡 = 𝛽1 + 𝛽2(𝑌𝑡 − 𝑌𝑡−1) + 𝜀2𝑡 ▸states that ______ depends on the change in national income.
investment
Where: ______ = consumption, Y = national income, I = investment, G = government expenditure t = time.
C
The last two equations contain the ______ disturbance or error terms 𝜀1𝑡 and 𝜀2𝑡 which are random variables that account for the inherent randomness of human behavior, the influence of variables not included in the e.
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Econometric Models- Algebraic models that include ______ variables are often called econometric models
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