Consider the following model: Ct = a0 + a1Yt + a2C(t1) + a3Pt + u1t Yt = 0 + 0It + 2Y(t1) + u2t It

Consider the following model:

Ct = a0 + a1Yt + a2C(t−1) + a3Pt + u1t Yt = β0 + β0It + β2Y(t−1) + u2t It = Yγ + Yγ Yt + γ2Kt + u3t Kt = δ0 + δ1Kt−1 + δ2Rt + u4t where the real variables are defined as follows:

Ct denotes real consumption, Yt denotes real national income, It denotes real investments, Rt denotes the index of industrial production, Pt denotes the price level, and Kt denotes real profits.

(a) Which of the aforementioned variables are considered to be endogenous and which are exogenous?

(b) Write the model in its typical form.

(b) Which of the four equations of the model can be estimated directly by simple OLS?

(b) Find the reduced form of the model.