Macroeconomic models are used to explain how ______ variables influence ______ variables.

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BlackTom AI · Accepted Answer

When we talk about macroeconomic models, we are typically examining how variables that the model takes as given or determined outside the model (exogenous variables) influence variables that the model tries to explain or endogenize within the system (endogenous variables).
Option a: 'endogenous; exogenous' would imply the model explains exogenous variables using endogenous ones, which is the reverse of the standard setup. In macro models, endogenous variables are the outcomes of interest, not the inputs being explained by other internal variables.
Option b: 'exogenous; endogenous' correctly reflects the conventional structure: exogenous variables are the outside drivers, and endogenous variables are determined within the model in response to those drivers.
Option c: 'microeconomic; macroeconomic' mislabels the scale and focus. Macro models deal with aggregate, not micro-level, variables, so this pairing mischaracterizes the relationship.
Option d: 'macroeconomic; microeconomic' swaps the directionality and scope, implying macro variables explain micro variables, which is not how standard macro models are designed to operate; macro models typically analyze how exogenous factors affect endogenous aggregates, not how macro variables drive micro ones in a direct, overall framework.

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Macroeconomic models are used to explain how variables influence variables.

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