In the equation
,the lack of a "bar" over the L means that it is:
A)an exogenous variable.
B)an endogenous variable.
C)a parameter.
D)constant.
E)equal to one.

Question

In the equation 
,the lack of a "bar" over the L means that it is:
A)an exogenous variable. 
B)an endogenous variable. 
C)a parameter. 
D)constant. 
E)equal to one.

Quizplus · Accepted Answer

In econometrics, a bar over a variable usually means that it is an endogenous variable, i.e. it is determined by the model itself rather than being determined outside of the model. The lack of a bar over the L in the given equation indicates that it is an exogenous variable, which means that it is determined by factors outside of the model. Therefore, the correct answer is B, which implies that the L is an endogenous variable.

In the Equation