Consider the following demand-and-supply model for money: Money demand: Md = β0 + β1Yt + β2Rt + β3Pt + u1t Money supply: Ms= α0 + α1Yt + u2t Assume that R and P are exogenous and M and Y are endogenous. a. Is the demand function identified? b. Is the supply function identified?
Consider the following demand-and-supply model for money: Money demand: Md = β0 + β1Yt + β2Rt + β3Pt + u1t Money supply: Ms= α0 + α1Yt + u2t Assume that R and P are exogenous and M and Y are endogenous. a. Is the demand function identified? b. Is the supply function identified?
Chapter14: Money And The Economy
Section: Chapter Questions
Problem 14QP
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Consider the following
Money demand: Md = β0 + β1Yt + β2Rt + β3Pt + u1t
Money supply: Ms= α0 + α1Yt + u2t
Assume that R and P are exogenous and M and Y are endogenous.
a. Is the demand function identified?
b. Is the supply function identified?
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