A VAR with Five Variables, 4 Lags and Constant Terms

question 2

Multiple Choice

A VAR with five variables, 4 lags and constant terms for each equation will have a total of

• A)21 coefficients.
• B)100 coefficients.
• C)105 coefficients.
• D)84 coefficients.

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Definitions:

Consumer Surplus

The gap between the price consumers are ready to pay for a good or service and the price they actually incur.

Marginal Revenue

The surplus revenue acquired from the sale of one more unit of a good or service.

Profit Maximizing Output

The level of production at which a firm achieves the highest possible profit, determined by the point where marginal cost equals marginal revenue.

Demand Curve

A graphic representation showing how the quantity demanded of a good or service varies with its price.