The distinction between exogenous and endogenous variables is important because:
a. Endogenous variables are determined within the Three-Sector-Model while exogenous variables are not. Exogenous variables are therefore treated as shocks to the Three-Sector-Model.
b. Exogenous variables are fixed by definition.
c. Endogenous variables are fixed by definition.
d. Exogenous variables are determined within the Three-Sector-Model while endogenous variables are not. Endogenous variables are therefore treated as shocks to the three markets.
e. Endogenous variables are real factors while exogenous variables are nominal factors.
Question 2
In general, expected inflation affects the nominal interest rate and nominal wage rate:
a. Quite differently because lenders and borrowers react to expected inflation in a very different manner from laborers and businesses.
b. In the same manner.
c. Quite differently because expected inflation does not affect labor contracts but it does affect interest rates.
d. Quite differently, because wages and salaries are heavily influenced by government rules and regulations but interest rates are determined in free and open markets.
e. None of the above.
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