Question 1

Wages with taxes are higher than wages without taxes.

Accepted Answer

A) True 
 B)False

Question 2

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. In 2005, Hurricane Katrina hit the Gulf Coast of the United States; this would cause a shift from curve ________ because this is an example of a(n) ________.

Accepted Answer

A)    negative TFP shock 
B)    increase in TFP 
C)    increase in the interest rate 
D)    rise in government expenditure 
E)  None of these answers is correct. 
A)    negative TFP shock 
B)    increase in TFP 
C)    increase in the interest rate 
D)    rise in government expenditure 
E)  None of these answers is correct.

Question 3

A change in total factor productivity will increase the demand for labor, which shifts the labor demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 4

The labor supply curve is increasing in ________ and decreasing in ________.

Accepted Answer

A)  leisure; the real wage 
B)  the nominal wage; leisure 
C)  consumption per person; leisure 
D)  leisure; consumption per person 
E)  None of these answers is correct. 
A)  leisure; the real wage 
B)  the nominal wage; leisure 
C)  consumption per person; leisure 
D)  leisure; consumption per person 
E)  None of these answers is correct.

Question 5

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

Accepted Answer

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

Question 6

When taxes are included in the labor market in the stylized DSGE model, real wages increase.

Accepted Answer

A) True 
 B)False

Question 7

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 the state of Colorado decided to raise its sales tax rate, this would cause a shift from curve ________, because changes in taxes are ________ in the stylized DSGE model.

Accepted Answer

A)    reflected in the marginal produce of capital 
B)    identical to a change in income taxes 
C)    similar to a change in TFP 
D)    negatively affected by TFP 
E)  None of these answers is correct. 
A)    reflected in the marginal produce of capital 
B)    identical to a change in income taxes 
C)    similar to a change in TFP 
D)    negatively affected by TFP 
E)  None of these answers is correct.

Question 8

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?

Accepted Answer

This is essentially Exercise 1 in revers

Question 9

Suppose a worker gets a new computer; this would:

Accepted Answer

A)  increase the nominal wage. 
B)  reduce the marginal product of labor. 
C)  increase the amount of leisure demanded. 
D)  increase the marginal product of labor. 
E)  None of these answers is correct. 
A)  increase the nominal wage. 
B)  reduce the marginal product of labor. 
C)  increase the amount of leisure demanded. 
D)  increase the marginal product of labor. 
E)  None of these answers is correct.

Question 10

In the Smets-Wouters DSGE model, ________ when there is an increase in government spending because ________.

Accepted Answer

A)  consumption falls; more government spending today means higher taxes later 
B)  consumption rises; more workers are attracted to higher nominal wages 
C)  inflation falls; prices are sticky 
D)  consumption falls; the natural rate of unemployment falls 
E)  None of these answers is correct. 
A)  consumption falls; more government spending today means higher taxes later 
B)  consumption rises; more workers are attracted to higher nominal wages 
C)  inflation falls; prices are sticky 
D)  consumption falls; the natural rate of unemployment falls 
E)  None of these answers is correct.

Question 11

In the Smets-Wouters DSGE model, an increase in government spending will cause:
i. Real GDP to rise
ii. Consumption to fall
iii. Inflation to rise

Accepted Answer

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

Question 12

The labor supply curve is derived from:

Accepted Answer

A)  people maximizing their utilities. 
B)  the marginal product of labor. 
C)  the equilibrium real wage. 
D)  minimizing the cost of work. 
E)  recognizing the opportunity cost of consumption. 
A)  people maximizing their utilities. 
B)  the marginal product of labor. 
C)  the equilibrium real wage. 
D)  minimizing the cost of work. 
E)  recognizing the opportunity cost of consumption.

Question 13

Consider the impulse response functions generated using the Altiga, Christiano, Eichenbaum, and Lindé (2011) DSGE model in response to a monetary shock. The endogenous variables are the output gap (ytilde_t), consumption (c_tpred), inflation (inflationq), and the interest rate (interest). Briefly discuss the results of the simulations, using macroeconomic theory.
Figure 15.10: Impulse Response Function to a Change in Money Supply

Accepted Answer

First, an expansion in the money supply

Question 14

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

Accepted Answer

A)  iii 
B)  i and ii 
C)  i 
D)  ii 
E)  None of these answers is correct. 
A)  iii 
B)  i and ii 
C)  i 
D)  ii 
E)  None of these answers is correct.

Question 15

With sticky prices in the stylized DSGE model, a monetary expansion:
i. Increases real wages
ii. Increases nominal wages
iii. Reduces output

Accepted Answer

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

Question 16

In the stylized DSGE model with sticky prices, how does contractionary monetary policy shock affect the labor market?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 17

Consider the impulse response functions generated using the Smets and Wouters (2007) DSGE model, in response to a shock to productivity (TFP) and government expenditures as shown in Figures 15.8 and 15.9. The endogenous variables are consumption (c), inflation (pinf), labor supply (lab), and GDP (y). Briefly discuss the results of the simulations using macroeconomic theory.
Figure 15.8: Impulse Response Function to a Change in Productivity   
Figure 15.9: Impulse Response Function to a Change in Government Spending

Accepted Answer

The first set of impulse response functi

Question 18

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

Accepted Answer

A)    increase in TFP 
B)    decrease in consumption 
C)    increase in the saving rate 
D)    rise in the nominal wage 
E)  None of these answers is correct. 
A)    increase in TFP 
B)    decrease in consumption 
C)    increase in the saving rate 
D)    rise in the nominal wage 
E)  None of these answers is correct.

Question 19

The early DSGE models assumed that TFP:

Accepted Answer

A)  fluctuates over time rather than growing at a constant rate. 
B)  is constant but labor supply changes. 
C)  is highly correlated with real interest rates. 
D)  equals the marginal product of capital. 
E)  is always positive. 
A)  fluctuates over time rather than growing at a constant rate. 
B)  is constant but labor supply changes. 
C)  is highly correlated with real interest rates. 
D)  equals the marginal product of capital. 
E)  is always positive.

Question 20

In the stylized DSGE model, the variable that allows future events to affect the economy today is inflation expectation.

Accepted Answer

A) True 
 B)False

Wages with taxes are higher than wages without taxes.

A change in total factor productivity will increase the demand for labor, which shifts the labor demand curve to the right.

The labor supply curve is increasing in and decreasing in .

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

When taxes are included in the labor market in the stylized DSGE model, real wages increase.

Suppose a worker gets a new computer; this would:

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

In the Smets-Wouters DSGE model, an increase in government spending will cause: i. Real GDP to rise ii. Consumption to fall iii. Inflation to rise

The labor supply curve is derived from:

With sticky prices in the stylized DSGE model, a monetary expansion: i. Increases real wages ii. Increases nominal wages iii. Reduces output

In the stylized DSGE model with sticky prices, how does contractionary monetary policy shock affect the labor market?

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

The early DSGE models assumed that TFP:

In the stylized DSGE model, the variable that allows future events to affect the economy today is inflation expectation.

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

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

Wages with taxes are higher than wages without taxes.

A change in total factor productivity will increase the demand for labor, which shifts the labor demand curve to the right.

The labor supply curve is increasing in ________ and decreasing in ________.

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

When taxes are included in the labor market in the stylized DSGE model, real wages increase.

Suppose a worker gets a new computer; this would:

In the Smets-Wouters DSGE model, ________ when there is an increase in government spending because ________.

In the Smets-Wouters DSGE model, an increase in government spending will cause: i. Real GDP to rise ii. Consumption to fall iii. Inflation to rise

The labor supply curve is derived from:

With sticky prices in the stylized DSGE model, a monetary expansion: i. Increases real wages ii. Increases nominal wages iii. Reduces output

In the stylized DSGE model with sticky prices, how does contractionary monetary policy shock affect the labor market?

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

The early DSGE models assumed that TFP:

In the stylized DSGE model, the variable that allows future events to affect the economy today is inflation expectation.

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

The labor supply curve is increasing in and decreasing in .

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

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