Question: Ct = 10 + 11 Yt + u1t ... (1) It = 20 + 21 Yt + 22 Yt1 + u2t ... (2) Yt =

Ct = 10 + 11 Yt + u1t ... (1)

It = 20 + 21 Yt + 22 Yt1 + u2t ... (2)

Yt = Ct + It + Gt ... (3)where:

C = consumption expenditure

I = investment expenditure

Y = income

G = government expenditure

Gt and Yt1 are assumed predetermined.

a) Use the rank and order conditions to determine the order of identification of the equations. (5)

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