One of the Reasons That Led to the Inconsistency of the Large

question 59

Multiple Choice

One of the reasons that led to the inconsistency of the large structural macroeconomic models was

• A)that endogenous variables such as foreign output were treated as exogenous.
• B)that all equations were estimated together to test their interrelations with one another.
• C)that individual equations were estimated in isolation with one another.
• D)that exogenous variables such as level of technology were treated as endogenous.

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Definitions:

Relevant Range

The relevant range is a level of activity within which assumptions about variable and fixed cost behaviors are valid, used for budgeting and forecasting.

Activity Level

A measure of the volume of work or operations in a company, influencing variable costs and often used for budgeting and performance evaluation.

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent, insurance, and salaries of permanent staff.

Relevant Range

The range of activity within which the assumptions about fixed and variable cost behavior are valid.