Question

1. (5 pts each) Suppose you are tasked with analyzing the following statements by a a) Government spending on assistance programs for the elderly increases the quality b) Graduating from college during a recession lowers your life-long stream of income. policymaker. Which variable would be exogenous and which would be endogenous? of life in older age. c) Students that spend a lot of time on their phones during lectures typically do worse on exams

Answer 1

An exogenous variable is not dependent on any factors or variables in the model (also called independent variables). An endogenous variable depends of other factors or variables in the model (also called dependent variables).

(a) Government spending is exogenous variable, and resulting quality of life is endogenous variable.

(b) Graduation during recession is exogenous variable, and resultant decrease in income is endogenous variable.

(c) Students spending time on phones is an exogenous variable, and resulting low score in exams is endogenous variable.