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In order to solve a model a.) we express the exogenous variables in terms of the...

In order to solve a model

a.) we express the exogenous variables in terms of the endogenous and parameters

b.)we express the endogenous variables in terms of the exogenous and parameters

c.) we express the parameters in terms of the exogenous variables

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Answer #1

In simultaneous equation system a model constitutes a system of simultaneous equations if all the relationships involved are needed for determining the value of at least one of the endogenous variables included in the model.

Endogeneous variables are the variables defined within the system while exogeneous are defined outside the system.

For finding the reduced form equation from the structural equation we express the endogenous variables in terms of the exogenous and parameters . This is then used for applying OLS techniques.

So answer is option B)

(You can comment for doubts )

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