Which of the Following Is an Endogenous Variable in the Dynamic

question 52

Multiple Choice

Which of the following is an endogenous variable in the dynamic model of aggregate demand and aggregate supply?

• A)π_t, inflation
• B)π_t* the central bank's inflation target
• C)ρ, the natural rate of interest
• D)π_{t - 1}, the previous period's inflation

---

Definitions:

Tradable Emissions Permits

A system that allows for the buying and selling of pollution allowances to regulate the total level of certain pollutants.

Equilibrium Price

The cost where the amount of a product or service sought after matches the amount available, achieving equilibrium in the market.

Equilibrium Quantity

The measure of goods or services that are supplied and in demand at the price where supply equals demand.

Tradable Emission Permits

Environmental policy tools that allow companies to buy or sell allowances to emit a certain amount of pollutants, incentivizing pollution reduction.