Which of the following is FALSE regarding the dynamic stochastic general equilibrium models?
A)in each quarter, shocks will occur that will affect the individual equations used in the model to describe the economy
B)decisions made by economic agents are assumed to depend on the agents' expectation about the future
C)most equations in the models are based on linear specifications
D)the models assume intertemporal optimization on everyone's part
E)some central banks use these models to better understand how the economy responds to policy changes

Question

Quizplus · Accepted Answer

Most DSGE models use nonlinear specifications for some of their equations which may not be strictly linear.

Which of the Following Is FALSE Regarding the Dynamic Stochastic