The key change the early DSGE models made to the ________ was to change the nature of ________ from ________.
A) AS/AD model; potential output; linear to fluctuating
B) quantity equation; velocity; being constant to moving in unpredictable ways
C) Robinson Crusoe model; the discount rate; high to low patience
D) Fisher equation; inflation expectations; ex post to ex ante
E) Solow model; TFP; growing at a constant rate to shocks

Question

Quizplus · Accepted Answer

DSGE models introduced the concept of Total Factor Productivity (TFP) experiencing shocks, deviating from the Solow model's assumption of TFP growing at a constant rate.

The Key Change the Early DSGE Models Made to the ________