If you were building a macroeconomic model that explores the effect of an increase in income tax rates on the size of the labour force,the exogenous variable(s)would be
A) income tax rates.
B) the size of the labour force.
C) both income tax rates and the size of the labour force.
D) neither income tax rates nor the size of the labour force.

Question

Quizplus · Accepted Answer

The exogenous variable in this case would be income tax rates since it is the variable that is being changed in order to explore its effect on the labour force size. The size of the labour force would be the endogenous variable, meaning that it is affected by the change in income tax rates.

If You Were Building a Macroeconomic Model That Explores the Effect