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Question: The Neoclassical Model (Modified Exercises 3 from GLS Ch18 on page 426 ) Consider the basic Neoclassical model. Suppose we assume specific functional forms for the consumption and investment demand functions. These are: Ct = c1(Yt - Gt) + c2(Yt+1 - Gt+1) - c3rt It = -d1rt + d2At+1 + d3Kt Here, c1 through c3 and d1 through ds are fixed parameters governing the sensitivity of consumption and investment to different factors relevant to those decisions.
(a) Which variables are endogenous and which ones are exogenous in the above consumption and investment functions?
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