In this system of equations, M represents money demand, M' money supply, Y national income, R...

  

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In this system of equations, M represents money demand, M' money supply, Y national income, R interest rate, and P price level. u and e are the random errors. (3) shows the equilibrium condition in money market. a) Indicate the endogenous and exogenous variables in this system and show if regressions (1) and/or (2) are identified. (15 point) b) Given the system of equations, show if you can estimate regression (1) and/or regression (2) using 2SLS method. If you can estimate either or both of these regressions, show how and explain. (15 point) In this system of equations, M represents money demand, M' money supply, Y national income, R interest rate, and P price level. u and e are the random errors. (3) shows the equilibrium condition in money market. a) Indicate the endogenous and exogenous variables in this system and show if regressions (1) and/or (2) are identified. (15 point) b) Given the system of equations, show if you can estimate regression (1) and/or regression (2) using 2SLS method. If you can estimate either or both of these regressions, show how and explain. (15 point)

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Lets look at the equations and variables to identify the endogenous and exogenous variables in the provided system of equations and to see if regressi... View the full answer