If you were building a macroeconomic model that explores the effect of the increase in interest rates on the inflation rate in Great Britain,interest rates would be an ________ variable and the inflation rate would be an ________ variable.
A) endogenous; endogenous
B) endogenous; exogenous
C) exogenous; exogenous
D) exogenous; endogenous

Question

Quizplus · Accepted Answer

Interest rates would be considered an exogenous variable, as they are determined by the central bank or monetary authority, while the inflation rate would be considered an endogenous variable, as it is affected by other variables within the model, such as economic output and consumption.

If You Were Building a Macroeconomic Model That Explores the Effect