Managerial Economics-ECO404
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ECO404 GDB No 1 Solution Fall 2020-VU-Managerial Economics
Managerial Economics-ECO404
GDB#1
Total Marks 5
Starting Date Thursday, December 17, 2020
Closing Date Wednesday, December 23, 2020
Status Open
Question Title Forecasting
Question Description THE CASE:
Single equation models are often used by firms to
forecast demand or sales. But economic relationships are so complex that
require multiple equation models. This is particularly the case in forecasting
macroeconomic variables such as gross national product or demand or sales of
major sectors or industries. Multiple equation models may include only a few
equations or hundreds of them. Consider the following three simple equation
model of the national economy that can be used to forecast the GNP of the
country.
Consumption (C) = a1 + b1GNP + u1 1
Investment (I) = a2+ b2 Profits in previous
years + u2 2
Definitional equation
GNP = Consumption (C) + Investment (I) + Government Expenditures (G)
Grab Also: MGT501 Assignment 1 solution Fall 2020-VU-Digilearnerspoint
The first two equations are the structural (behavioral) equations while the third equation is
the definitional equation.
Grab Also: ECO406 Assignment 2 Solution Fall 2020-VU-Digilearnerspoint
REQUIREMENT:
This simple macroeconomic model contains three
endogenous variables and two exogenous variables. Identify those variables.
Also, discuss why economists prefer econometric methods in forecasting over
other methods.
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