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An economic variable can be exogenous in some models and endogenous in others. In particular this can happen when one model also serves as a component of a broader model. For example, the [[IS-LM|IS]] model of only the goods market<ref name=Mankiw/>{{rp|pp. 250–260}} derives the [[Market clearing|market-clearing]] (and thus endogenous) level of [[output (economics)|output]] depending on the exogenously imposed level of [[interest rate]]s, since interest rates affect the [[physical investment]] component of the demand for goods. In contrast, the [[IS-LM|LM]] model of only the money market takes income (which [[identity (mathematics)|identically]] equals output) as exogenously given and affecting [[money demand]]; here equilibrium of money supply and money demand endogenously determines the interest rate. But when the IS model and the LM model are combined to give the [[IS-LM model]],<ref name=Mankiw/>{{rp|pp. 268–9}} both the interest rate and output are endogenously determined.
== See also ==
* [[Cambridge capital controversy]]
== References ==
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