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In the Smets-Wouters DSGE Model, the Financial Friction Is Introduced

Question 13

Multiple Choice

In the Smets-Wouters DSGE model, the financial friction is introduced by a:


A) "wedge" between consumer interest rates and the federal funds rate.
B) discount rate greater than one.
C) large risk premium.
D) monetary policy parameter ( In the Smets-Wouters DSGE model, the financial friction is introduced by a: A) wedge between consumer interest rates and the federal funds rate. B) discount rate greater than one. C) large risk premium. D) monetary policy parameter ( ) equal to zero. E) breakdown in the Taylor rule. ) equal to zero.
E) breakdown in the Taylor rule.

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