Consider the following equation for household consumption expenditure:

Consmptn= 0+ 1Inc + 2Consmptn-1+ u
where ‘Consmptn' measures the monthly consumption expenditure of a household, ‘Inc' measures household income and ‘Consmptn-1' is the consumption expenditure in the previous month. Consmptn-1 is a _____ variable.

A. exogenous
B. binary variable
C. lagged dependent
D. proxy variable


Answer: C

Economics

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