THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
Consider the following model: Y = β₀ + β₁X₁_t + β₂X₂_t + γY_t_-1.Suppose we increase X₁ by one unit in time period t,with all other independent variables in the model held fixed.
-What is the expected increase in the dependent variable in time period (t + 1) ?

Question

Quizplus · Accepted Answer

The expected increase in the dependent variable in time period (t + 1) due to a one-unit increase in $X$ at time $t$, with all other variables held constant, is represented by the coefficient of the term that includes $X$ and affects $Y$ in period $t + 1$. In this model, that term is $\beta_{11}X\gamma$, indicating that the expected increase is the product of $\beta_{11}$ and $\gamma$, without any additional terms or modifications.