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

Sticky nominal wages can lead to a labor surplus.

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

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

You are presented with the following data, which shows real wages, employment, and M1 money supply, all indexed to 2007. You recall that a DSGE model predicts the behavior as shown in the figure. Which model is it? Explain.Figure 15.5: Real Wages, Employment, and M1: 2010-2015 (Source: FRED II)

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 that 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.

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

In 2003, Ireland reduced its corporate tax rate from 16 percent to 12.5 percent. In labor markets this would ________, which would ________.

A temporary increase in government spending ________, and a permanent increase in government spending ________.

A constraint to complicated macroeconomic models has been:

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

In perfect competition, firms hire workers until the:

The quantitative DSGE model that is being used by the Fed and European Central Bank is from:

Using the Cobb-Douglas production , the marginal product of labor, or the real wage, is .

The problem the individual solves to derive the labor supply is:

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

Inflation falls following the introduction of a financial friction in the Smets-Wouters DSGE model.

In DSGE models, the passage of the Affordable Care Act increased ________, which would be ________ shock today.

In December 2010, Congress and President Obama extended the G. W. Bush tax cuts to help pull the economy out of the Great Recession. You are pretty familiar with the Smets-Wouters DSGE model and decided to explain to local politicians why you did not think this would help households in the short run. Explain.

You are a recent hire at the Labor Department and are asked to assess monetary policy's effects on labor markets using a stylized DSGE model with sticky prices. You read the Fed's policy statement, and given the negative output gap it decides to ________, which would ________ and ________.