# ps8 - Problem Set 8 ECON 837 Prof. Simon Woodcock, Spring...

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Unformatted text preview: Problem Set 8 ECON 837 Prof. Simon Woodcock, Spring 2006 Do not hand in 1. Consider a simple Keynesian model of national income determination: C t = & + Y t + " t (1) Y t = C t + I t (2) where C t is consumption, Y t is income, and I t is investment. Assume " t & iid (0 ; 2 ) : (a) Identify endogenous and exogenous variables in the model and derive the reduced form equations. (b) Find the probability limit of ^ = P t & C t & C & Y t & Y P t & Y t & Y 2 i.e., the least squares estimator of in equation (1). Is it consistent? If not, give an intuitive reason why. 2. A researcher speci&es the following equation system to model an agricultural market q s t = 10 + 11 p t + 12 x 1 t + u 1 t (3) q d t = 20 + 21 p t + 22 x 2 t + u 2 t (4) q s t = q d t (5) where q s t is the log quantity supplied at time t; q d t is the log quantity demanded at time t; p t is the log price at time t; x 1 t is log sales of fertilizer at time t; and x 2 t is log median income. The assumed error structure ismedian income....
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## This note was uploaded on 10/08/2011 for the course PHYS 102 taught by Professor Thewalt during the Spring '09 term at Simon Fraser.

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ps8 - Problem Set 8 ECON 837 Prof. Simon Woodcock, Spring...

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