The 1990s U.S. economy enjoyed a technology jump in the form of the Internet. Which of the following is likely to be predicted by a DSGE model?
i. A decline in the marginal product of labor
ii. A decrease in output
iii. An increase in the real wage
A) iii
B) ii
C) i
D) i and ii
E) ii and iii

Question

Quizplus · Accepted Answer

An increase in technology, such as the advent of the Internet, is likely to increase productivity. This, in turn, can lead to an increase in the real wage as workers become more productive. Dynamic Stochastic General Equilibrium (DSGE) models, which incorporate technology shocks, would predict such an outcome.