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 endogenous 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 endogenous variable is the one that the model seeks to explain or predict, which in this case is the size of the labour force. Income tax rates would be an exogenous variable, as they are determined outside the model.

If You Were Building a Macroeconomic Model That Explores the Effect