Question 1

A computer virus that temporarily shuts down major manufacturers would:

Accepted Answer

A)  temporarily reduce output. 
B)  increase the marginal product of capital. 
C)  reduce leisure demand. 
D)  have a negative and long-term impact on consumption. 
E)  None of these answers is correct. 
A)  temporarily reduce output. 
B)  increase the marginal product of capital. 
C)  reduce leisure demand. 
D)  have a negative and long-term impact on consumption. 
E)  None of these answers is correct.

Question 2

An important element of almost every DSGE model is:

Accepted Answer

A)  real exchange rates. 
B)  the debt-to-GDP ratio. 
C)  the labor market. 
D)  fiscal tightness. 
E)  the trade balance. 
A)  real exchange rates. 
B)  the debt-to-GDP ratio. 
C)  the labor market. 
D)  fiscal tightness. 
E)  the trade balance.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

With sticky prices, in the stylized DSGE model, a monetary contraction ________, which ________.

Accepted Answer

A)  raises inflationary expectations; pushes the Phillips curve up 
B)  lowers inflationary expectations; expands labor supply 
C)  decreases aggregate demand; decreases labor demand 
D)  raises taxes; reduces labor demand 
E)  represents a fiscal expansion; pushes up labor demand 
A)  raises inflationary expectations; pushes the Phillips curve up 
B)  lowers inflationary expectations; expands labor supply 
C)  decreases aggregate demand; decreases labor demand 
D)  raises taxes; reduces labor demand 
E)  represents a fiscal expansion; pushes up labor demand

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

In the stylized DSGE model in the text, we treat consumption as endogenous.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

In the Smets-Wouters DSGE model presented in the text, contractionary monetary policy has the largest impact on hours worked.

Accepted Answer

A) True 
 B)False

Question 9

Refer to the following figure when answering the following questions.
Figure 15.2: The Labor Market  
-In the labor market displayed in Figure 15.2, the distance between points   and  
Is called ________ and is due to ________.

Accepted Answer

A)  involuntary unemployment; sticky nominal wages 
B)  unemployment; sticky real wages 
C)  the "reserve army"; institutional frictions 
D)  the excess demand for labor; rising TFP 
E)  government employment; a fiscal expansion 
A)  involuntary unemployment; sticky nominal wages 
B)  unemployment; sticky real wages 
C)  the "reserve army"; institutional frictions 
D)  the excess demand for labor; rising TFP 
E)  government employment; a fiscal expansion

Question 10

The first model to introduce a technology shock was the Solow real business cycle model.

Accepted Answer

A) True 
 B)False

Question 11

The early DSGE models assumed that TFP fluctuates over time rather than growing at a constant rate.

Accepted Answer

A) True 
 B)False

Question 12

If the classical dichotomy holds a change in monetary policy, it ________ and ________.

Accepted Answer

A)  increases employment; reduces taxes 
B)  has no real effects; only affects nominal variables 
C)  changes output; has no influence on inflation 
D)  will reduce unemployment; cannot increase inflation 
E)  has no nominal effects; only moves real variables 
A)  increases employment; reduces taxes 
B)  has no real effects; only affects nominal variables 
C)  changes output; has no influence on inflation 
D)  will reduce unemployment; cannot increase inflation 
E)  has no nominal effects; only moves real variables

Question 13

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

Accepted Answer

A)  agree to produce what is demanded; vertical 
B)  must update their expectations; equal to the marginal product of labor 
C)  use adaptive expectations; horizontal 
D)  produce at the natural rate of output; downward sloping 
E)  supply at marginal cost; perfectly competitive 
A)  agree to produce what is demanded; vertical 
B)  must update their expectations; equal to the marginal product of labor 
C)  use adaptive expectations; horizontal 
D)  produce at the natural rate of output; downward sloping 
E)  supply at marginal cost; perfectly competitive

Question 14

Refer to the following figure when answering the following questions.
Figure 15.1: The Labor Market  
-Consider Figure 15.1, which is a representation of the labor market. If there is a forest fire that shuts down the electric grid, you would see a shift from curve ________ because this is an example of a(n) ________.

Accepted Answer

A)    increase in TFP 
B)    decrease in TFP 
C)    increase in taxes 
D)    rise in consumption 
E)  None of these answers is correct. 
A)    increase in TFP 
B)    decrease in TFP 
C)    increase in taxes 
D)    rise in consumption 
E)  None of these answers is correct.

Question 15

Which of the following features is/are frequently included in modern DSGE models?
i. Nominal rigidities
ii. Complete markets
iii. Homogeneity

Accepted Answer

A)  i 
B)  ii and iii 
C)  i and ii 
D)  i, ii, and iii 
E)  i and iii 
A)  i 
B)  ii and iii 
C)  i and ii 
D)  i, ii, and iii 
E)  i and iii

Question 16

Figure 15.1: The Labor Market   a.   and   d.   b.   .
e.
None of these answers is correct.
c.   .
-In the stylized DSGE model, the motivation for a rise in government expenditure ________ today is ________.

Accepted Answer

A)  reducing consumption; the permanent-income hypothesis 
B)  raising wages; a rise in TFP 
C)  increasing labor demand; the Solow growth model 
D)  forcing workers to work; capacity utilization 
E)  increasing leisure; diminishing returns to consumption 
A)  reducing consumption; the permanent-income hypothesis 
B)  raising wages; a rise in TFP 
C)  increasing labor demand; the Solow growth model 
D)  forcing workers to work; capacity utilization 
E)  increasing leisure; diminishing returns to consumption

Question 17

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 ________.

Accepted Answer

A)  TFP changes to offset tax rates; any change to taxes is reflected in TFP 
B)  wages to be lower in Belgium; corporate tax rates behave similarly to TFP 
C)  real interest rates to be higher in Belgium; firms would substitute out of capital into labor 
D)  wages to be higher in Belgium; income tax rates behave similarly to TFP 
E)  Not enough information is given. 
A)  TFP changes to offset tax rates; any change to taxes is reflected in TFP 
B)  wages to be lower in Belgium; corporate tax rates behave similarly to TFP 
C)  real interest rates to be higher in Belgium; firms would substitute out of capital into labor 
D)  wages to be higher in Belgium; income tax rates behave similarly to TFP 
E)  Not enough information is given.

Question 18

"DSGE" stands for:

Accepted Answer

A)  dynamic stochastic general equilibrium. 
B)  deterministic simulated generalized estimation. 
C)  demand supply generated effects. 
D)  discrete stationary generated equilibrium. 
E)  demand and supply government expenditures. 
A)  dynamic stochastic general equilibrium. 
B)  deterministic simulated generalized estimation. 
C)  demand supply generated effects. 
D)  discrete stationary generated equilibrium. 
E)  demand and supply government expenditures.

Question 19

In the Smets-Wouters DSGE model, consumption falls when there is an increase in government spending because of consumption smoothing.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  monetary; quantity theory of money 
B)  Keynesian; IS/MP model 
C)  island; Robinson Crusoe model 
D)  real business cycle; Solow model 
E)  altruism; overlapping generations model 
A)  monetary; quantity theory of money 
B)  Keynesian; IS/MP model 
C)  island; Robinson Crusoe model 
D)  real business cycle; Solow model 
E)  altruism; overlapping generations model

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

A computer virus that temporarily shuts down major manufacturers would:

An important element of almost every DSGE model is:

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

With sticky prices, in the stylized DSGE model, a monetary contraction ________, which ________.

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

In the stylized DSGE model in the text, we treat consumption as endogenous.

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

In the Smets-Wouters DSGE model presented in the text, contractionary monetary policy has the largest impact on hours worked.

Refer to the following figure when answering the following questions. Figure 15.2: The Labor Market -In the labor market displayed in Figure 15.2, the distance between points and Is called ________ and is due to ________.

The first model to introduce a technology shock was the Solow real business cycle model.

The early DSGE models assumed that TFP fluctuates over time rather than growing at a constant rate.

If the classical dichotomy holds a change in monetary policy, it ________ and ________.

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

Which of the following features is/are frequently included in modern DSGE models? i. Nominal rigidities ii. Complete markets iii. Homogeneity

Figure 15.1: The Labor Market a. and d. b. . e. None of these answers is correct. c. . -In the stylized DSGE model, the motivation for a rise in government expenditure ________ today is ________.

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 ________.

"DSGE" stands for:

In the Smets-Wouters DSGE model, consumption falls when there is an increase in government spending because of consumption smoothing.

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

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market, Wages, and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

With sticky prices, in the stylized DSGE model, a monetary contraction , which .

Refer to the following figure when answering the following questions. Figure 15.2: The Labor Market -In the labor market displayed in Figure 15.2, the distance between points and Is called and is due to .

If the classical dichotomy holds a change in monetary policy, it and .

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

Figure 15.1: The Labor Market a. and d. b. . e. None of these answers is correct. c. . -In the stylized DSGE model, the motivation for a rise in government expenditure today is .

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 .

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