Figure 1.2 Standard short run closure
Exogenous
Source: Horridge (2000)
In a typical long run closure, as illustrated by Figure 1.3 the real wage, capital stock, private
consumption, investment, and government consumption are now made endogenous. The rate
of return on capital, employment, trade balance and technology variables, amongst others,
are now exogenous. The closure used in this simulation will be discussed in the following
section.
Figure 1.3 Standard long run closure
Exogenous
Residual
Source: Horridge (2000)