DSGE models that contain many different types of households and firms are known as
A)heterogeneous-agent models.
B)homogeneous-agent models.
C)dynamic models.
D)multi-layered models.

Question

Quizplus · Accepted Answer

DSGE models that contain many different types of households and firms are known as heterogeneous-agent models. This is because they incorporate agents with different characteristics and behaviors, such as different levels of wealth, income, preferences, and expectations, which can affect the economy's aggregate outcomes and dynamics. By contrast, homogeneous-agent models assume that all agents are identical and rational, which may not reflect the heterogeneity and diversity of real-world economies.

DSGE Models That Contain Many Different Types of Households and Firms