(Answered) Consider the following modied keynesian model of income

Economics

Consider the following modi?ed Keynesian model of income deter- mination: Ct = β10 + β11 Yt + u1t , It = β20 + β21 Yt + β22 Yt-1 + u2t Yt = Ct + It + Gt

where C = consumption expenditure
I = investment expenditure
Y = income
G = government expenditure
Gt and Yt-1 are assumed predetermined

a. Obtain the reduced-form equations and determine which of the pre- ceding equations are identi?ed (either just or over).

b. Which method will you use to estimate the parameters of the over- identi?ed equation and of the exactly identi?ed equation? Justify your answer.

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