In an Economic Model

question 56

Multiple Choice

In an economic model,

• A) endogenous variables determine exogenous variables.
• B) exogenous variables determine endogenous variables.
• C) the government budget constraint determines exogenous variables.
• D) fiscal policy determines endogenous variables.
• E) endogenous and exogenous variables are determined simultaneously.

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Definitions:

Nominal Interest Rate

The interest rate in terms of nominal (not adjusted for purchasing power) dollars.

Coupon Rate

A bond’s interest payments per dollar of par value.

Expected Rate of Inflation

An estimate of the rate at which the general level of prices for goods and services will rise over a period.

Annual Real Rate

The annual rate of return on an investment, adjusted for inflation, indicating the real increase in the value of the investment over a year.