In DGSE models, the dynamics of how macro variables react to a policy shock is called:
A) the estimated coefficient.
B) transition dynamics.
C) an impulse response function.
D) a policy response function.
E) Ricardian equivalence.

Question

Quizplus · Accepted Answer

An impulse response function describes how macroeconomic variables react over time to a policy shock in Dynamic Stochastic General Equilibrium (DGSE) models, capturing the dynamic effects of shocks on the economy.

In DGSE Models, the Dynamics of How Macro Variables React