Exam 15: Dsge Models: the Frontier of Business Cycle Research

Refer to the following figure when answering Figure 15.1: The Labor Market -Consider Figure 15.1, which is a representation of the labor market. If the state of Colorado decided to raise its sales tax rate, this would cause a shift from curve ________ because changes in taxes ________ in the stylized DSGE model.

In DSGE models, the passage of "Obamacare" increased ________, which would be ________ shock today.

Using the Cobb-Douglas production $Y = \bar { A } K ^ { 1 / 3 } L ^ { 2 / 3 }$ , the marginal product of labor, or the real Wage, is:

In the Solow model, ________ is assumed to be constant.

Figure 15.6 shows the difference between Greek and German 10-year bond yields from 2007-2013. Answer the following questions: a. What does this data represent? b. In the Smets-Wouters DSGE model, what type of shock is this? c. How does this shock affect the macroeconomy in the Smets-Wouters DSGE model? Explain. Figure 15.6: 10-Year Bond Yields: Greece minus Germany (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)

The labor market equilibrium determines the market clearing the ________ and ________.

With sticky nominal wages, a monetary expansion causes real wages to fall.

In the Smets-Wouters DSGE model, a negative TFP shock will cause real GDP to ________ by ________.

Which of the following represents labor supply?

Refer to the following figure when answering Figure 15.2: The Labor Market -In the stylized DSGE model for the labor market displayed in Figure 15.2, the line marked $\bar W$ is due to which of the following? i. Cyclical unemployment ii. Sticky prices iii. Sticky wages

Which of the following features are frequently included in modern DSGE models? i. Adverse selection ii. Complete markets iii. Moral hazard

With a financial friction shock, the Smets-Wouters DSGE model shows that the largest impact is on:

The key change the early DSGE models made to the ________ was to change the nature of ________ from ________.

Sticky nominal wages can lead to a labor surplus.

In the movie (and book) Sahara, toxic waste is leeching into Mali's groundwater. Which of the following effects would you expect to occur in the DSGE framework? i. A decline in the marginal product of labor ii. An increase in output iii. A decline in the real wage

In the Smets-Wouters DSGE model, a positive TFP shock will cause real GDP to rise by more than the initial shock.

In Belgium the corporate tax rate is 33 percent, while in the Netherlands it is about 25 percent. In labor markets in the stylized DSGE model, you would expect ________ , ceteris paribus, because ________.

A computer virus that temporarily shuts down major manufacturers would:

In the Smets-Wouters DSGE model, a positive TFP shock has an immediate ________ but ________.

The first order condition from the individual's utility maximization problem used to determine the labor supply curve is: