Figure 15.1: The Labor Market a. and d. b. .
e.
None of these answers is correct.
c. .
-In the stylized DSGE model, the motivation for a rise in government expenditure ________ today is ________.
A) reducing consumption; the permanent-income hypothesis
B) raising wages; a rise in TFP
C) increasing labor demand; the Solow growth model
D) forcing workers to work; capacity utilization
E) increasing leisure; diminishing returns to consumption

Question

Figure 15.1: The Labor Market  a.  and  d.  b.  .
e.
None of these answers is correct.
c.  .
-In the stylized DSGE model, the motivation for a rise in government expenditure ________ today is ________.
A) reducing consumption; the permanent-income hypothesis 
B) raising wages; a rise in TFP 
C) increasing labor demand; the Solow growth model 
D) forcing workers to work; capacity utilization 
E) increasing leisure; diminishing returns to consumption

Quizplus · Accepted Answer

In a DSGE model, a rise in government expenditure today can reduce consumption due to the permanent-income hypothesis, which suggests that consumers adjust their consumption based on expected lifetime income rather than current income.

Figure 151: the Labor Market A A