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

The 1990s U.S. economy enjoyed a technology jump in the form of the Internet. Which of the following is likely to be predicted by a DSGE model? i. A decline in the marginal product of labor ii. A decrease in output iii. An increase in the real wage

Refer to the following figure when answering Figure 15.3: The Labor Market -In the stylized DSGE model for the labor market displayed in Figure 15.3, with sticky prices, the Fed's desire to expand the economy would move the labor market from:

The labor supply curve is derived from:

In the stylized DSGE model, if government expenditures rise, ________ rise(s) and ________, which causes ________.

Which of the following is true when a financial friction is included in the Smets-Wouters DSGE model? i. Consumption rises ii. Investment rises iii. Inflation falls

With sticky prices, in the stylized DSGE model, firms ________ and labor demand is ________.

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 an economy improves its legal system, you would see a shift from curve ________ because this is an example of a(n) ________.

In 2013, there were numerous global conflicts: civil war in Syria, unrest in Brazil, and continued turmoil in Iraq and Afghanistan. Though many of these conflicts are far from U.S. borders, how might they play out in the American economy (i.e., in labor markets), using the standard stylized version of the DSGE model? What if wages were sticky?

The labor supply is represented by $L ^ { s } = \frac { \bar { \ell } w } { c }$ .

The first DSGE models were called ________ models and used the ________ to study macroeconomic fluctuations.

In the stylized DSGE model with sticky prices, we can characterize contractionary monetary policy shock effect the labor market by $F F R \downarrow \rightarrow A D \uparrow \rightarrow \pi \uparrow \rightarrow \left( \frac { W } { P } \right) \uparrow$ .

You are a finance minister in Iceland and are being pressured by labor unions to raise the corporate tax rate, which currently is 15 percent. They argue because it is among the lowest in the European Union it is "anti-labor." Using the labor market framework in the stylized DSGE model, tell them that lowering it even further would actually benefit labor.

Which of the following could be a negative TFP shock?

When consumption falls, ________ also tend(s) to fall.

In DGSE models, the dynamics of how macrovariables react to a policy shock is called an impulse response function.

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, with sticky wages, expansionary monetary policy would cause a move from ________ because ________.

A constraint to complicated macroeconomic models has been:

RBC stands for:

In Figure 15.1, which is a representation of the labor market, a decrease in government expenditure is represented by: Figure 15.1: The Labor Market

With a nominal price rigidity, firms cannot change the market clearing price.