In the Smets-Wouters DSGE Model, a Negative TFP Shock Will

Multiple Choice

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

A) fall; more than the decline in the shock
B) rise; more than predicted by empirical models
C) not change; Okun's law
D) fall; less than consumption
E) fall; the same as the decline in inflation