Figure 15.1: The Labor Market a. and d. b. .
e.
None of these answers is correct.
c. .
-In the stylized DSGE model, if government expenditures rise, ________ rise(s) and ________, which causes ________.
A) labor demand; real wages rise; inflation to rise
B) wages; labor demand falls; consumption to decline
C) labor supply; real wages fall; consumption to fall
D) real interest rates; inflation rises; the marginal product of capital to rise
E) taxes; labor demand rises; output to fall

Question

Figure 15.1: The Labor Market  a.  and  d.  b.  .
e.
None of these answers is correct.
c.  .
-In the stylized DSGE model, if government expenditures rise, ________ rise(s) and ________, which causes ________.
A) labor demand; real wages rise; inflation to rise 
B) wages; labor demand falls; consumption to decline 
C) labor supply; real wages fall; consumption to fall 
D) real interest rates; inflation rises; the marginal product of capital to rise 
E) taxes; labor demand rises; output to fall

Quizplus · Accepted Answer

In a DSGE model, an increase in government expenditures typically increases labor supply as individuals work more to pay higher taxes or due to increased demand for goods. This can lead to a fall in real wages and a decrease in consumption.

Figure 151: the Labor Market A A