Consider this model in which national income Y depends on the previous periods income and the current
Question:
Consider this model in which national income Y depends on the previous period’s income and the current and previous period’s money supply M:
where the parameters α, β1, β2, and β3 are positive.
a. If the money supply is held constant, show the conditions under which the model is stable.
b. If the money supply is adjusted in each period to hold income constant, show the conditions under which the model is stable.
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Related Book For 
Essential Statistics Regression And Econometrics
ISBN: 9780123822215
1st Edition
Authors: Gary Smith
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