In the DSGE framework, prospects for a "fiscal cliff" in the fall of 2012 increases ________ about the future leading firms to ________, which would ________.
A) uncertainty; delay investment; slow economic activity
B) federal surpluses; hire more workers; decrease unemployment
C) state spending; reduce pensions; reduce the labor supply
D) tax rates; increase investment; improve TFP
E) interest rates; reduce investment; lead to better long-term growth

Question

Quizplus · Accepted Answer

The increase in uncertainty about the future due to the fiscal cliff would lead firms to delay investment, which would slow economic activity.

In the DSGE Framework, Prospects for a "Fiscal Cliff" in the Fall