Consider the following equation for household consumption expenditure: Consmptn= ₀+ ₁Inc + ₂Consmptn_-1+ u
Where 'Consmptn' measures the monthly consumption expenditure of a household, 'Inc' measures household income and 'Consmptn_-1' is the consumption expenditure in the previous month. Consmptn_-1 is a _____ variable.

Question

Consider the following equation for household consumption expenditure: Consmptn=

₀+

₁Inc +

₂Consmptn_-1+ u
Where 'Consmptn' measures the monthly consumption expenditure of a household, 'Inc' measures household income and 'Consmptn_-1' is the consumption expenditure in the previous month. Consmptn_-1 is a _____ variable.

Quizplus · Accepted Answer

Consmptn_-1 is a lagged dependent variable, as it is the dependent variable from a previous time period used as a predictor for the current time period. 'Consmptn_-1' is a lagged dependent variable in this model.

Consider the Following Equation for Household Consumption Expenditure: Consmptn=