What do RBC economists mean by the term calibration?
A)modifying the structure of an economic theory to strengthen its logic
B)changing a theory as the economy changes
C)working out a detailed numerical example of a more general theory
D)writing out the implication of a theory for all the main economic variables

Question

Quizplus · Accepted Answer

Calibrating a model involves working out detailed numerical examples to understand how a general theory will work out in practice. This process involves determining values for key parameters, such as interest rates or tax rates, and using these values to simulate the model's behavior under different scenarios. It helps economists test the model's predictions and makes their analysis more precise.

What Do RBC Economists Mean by the Term Calibration