Identify the endogenous and predetermined variables in the model.
Why is endogeneity an important identification condition for simultaneous equation models? (2 pts) Why is the probit model referred to as latent variable model? (2 pts) Consider the following extended Keynesian model of income determination: Consumption function: Ct=1+2Yt-3Tt+1t Investment Function: It=0+1Yt-1+2t Taxation Function: Tt=0+1Yt+3t Income Identity: Yt=C1+It+Gt Where, C consumption expenditure, Y income, I investment, … Read more