The so-called DSGE models assume that
A)what happens in the future depends to a large degree on the decisions that economic agents make in the present
B)people have rationally designed long?term plans and adapt fairly easily to unexpected shocks to the economy
C)markets tend to clear even though they are not always all perfectly competitive
D)the forward?looking behavior of economic agents is the result of their rational expectations
E)all of the above

Question

Quizplus · Accepted Answer

All of the above statements are assumptions made in DSGE models. These models assume that individuals and firms make rational decisions based on their expectations of future economic conditions, and markets tend to eventually clear even if they are not perfectly competitive. The models also assume that unexpected shocks can be absorbed fairly quickly, and that economic agents have the ability to adapt to changing conditions.

The So-Called DSGE Models Assume That