Question 1

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 ________.

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.

Question 2

If the classical dichotomy holds a change in monetary policy, it ________ and ________.

Accepted Answer

The classical dichotomy states that real variables such as output and employment are unaffected by changes in the nominal variable of money. Therefore, a change in monetary policy will only affect nominal variables such as inflation and nominal interest rates, but will have no real effects on the economy in the long run.

Question 3

In 2003, Ireland reduced its corporate tax rate from 16 percent to 12.5 percent. In labor markets this would ________, which would ________.

Accepted Answer

A reduction in corporate tax rate is likely to attract more businesses to locate in Ireland, leading to an increase in labor demand. This would push real wages up as firms compete for workers.

Question 4

In Belgium, the corporate tax rate is 33 percent, while in the Netherlands it is about 25 percent.
In labor markets in the stylized DSGE model, you would expect ________, ceteris paribus,
Because ________.

Accepted Answer

In the stylized DSGE model, labor markets are assumed to be perfectly competitive, meaning that wages are equal to the marginal product of labor. With a higher corporate tax rate in Belgium, firms would have lower profits and lower marginal products of labor, leading to lower wages. Corporate tax rates do not behave similarly to TFP, as TFP is an exogenous variable not influenced by tax policy. Real interest rates would not necessarily be affected by tax rates, as changes in tax rates may affect the demand for capital, offsetting any changes in supply. Income tax rates were not mentioned in the scenario and are therefore not relevant.

Question 5

When taxes are included in the stylized DSGE model, with Cobb-Douglas production, labor demand is given by:

Accepted Answer

The answer of When taxes are included in the stylized...

Question 6

In the labor supply model  , we can think of ________ as ________.

Accepted Answer

The answer of In the labor supply model  ,...

Question 7

When taxes are included in the stylized DSGE model, with Cobb-Douglas production, labor demand is given by:

Accepted Answer

The answer of When taxes are included in the stylized...

Question 8

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 ________.

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.

Question 9

Refer to the following figure when answering the following questions.
Figure 15.1: The Labor Market 
-Consider Figure 15.1, which is a representation of the labor market. In 2008, China reduced its corporate tax rate from 33 percent to 25 percent; this would cause a shift from curve ________, because changes in taxes are ________ in the stylized DSGE model.

Accepted Answer

The answer of Refer to the following figure when answering...

Question 10

Refer to the following figure when answering the following questions.
Figure 15.2: The Labor Market 
-In the stylized DSGE model for the labor market displayed in Figure 15.2, with sticky wages, expansionary monetary policy would cause a move from ________ because ________.

Accepted Answer

In the stylized DSGE model with sticky wages, expansionary monetary policy would cause other prices to rise because nominal wages are sticky and cannot adjust immediately to changes in the money supply. As other prices increase, the real wage rate falls, which stimulates firms to increase employment and output. This results in a reduction in the natural rate of unemployment (the rate at which the labor market would clear if wages were perfectly flexible) but does not eliminate involuntary unemployment entirely.

Question 11

Sticky nominal wages can lead to:

Accepted Answer

Sticky nominal wages refer to the situation where wages are resistant to change even when there is a mismatch between the supply and demand for labor. This can lead to involuntary unemployment, where workers are willing to work at the prevailing wage rate, but employers are not willing to hire them because the wage is too high. This happens because employers cannot lower wages in the short run, which creates a deadweight loss in the labor market.

Question 12

In the stylized DSGE model's representation of labor markets, if corporate tax rates rise and TFP rises, real wages would:

Accepted Answer

The answer of In the stylized DSGE model's representation of...

Question 13

Refer to the following figure when answering the following questions.
Figure 15.1: The Labor Market 
-Consider Figure 15.1, which is a representation of the labor market. In 2005, Hurricane Katrina hit the Gulf Coast of the United States; this would cause a shift from curve ________ because this is an example of a(n) ________.

Accepted Answer

A negative TFP (Total Factor Productivity) shock represents a decrease in the efficiency with which labor and capital are used to produce output. Hurricane Katrina caused significant damage to infrastructure, businesses, and homes in the Gulf Coast region, leading to disruptions in production and a decrease in productivity in the affected areas. This would cause a shift from curve C to curve B in the labor market diagram, as shown in Figure 15.1. None of the other answer choices are applicable in this scenario.

Question 14

A temporary increase in government spending ________, and a permanent increase in government spending ________.

Accepted Answer

A temporary increase in government spending shifts the labor supply up because it increases the demand for labor, while a permanent increase in government spending has no impact on labor supply because it does not change the relative prices of goods and services.

Question 15

In the stylized DSGE model, the variable that allows future events to affect the economy today is:

Accepted Answer

The answer of In the stylized DSGE model, the variable...

Question 16

When consumption falls, ________ also tend(s) to fall.

Accepted Answer

The answer of When consumption falls, ________ also tend(s) to...

Question 17

In Figure 15.1, which is a representation of the labor market, a decrease in government expenditure is represented by:

Accepted Answer

The answer of In Figure 15.1, which is a representation...

Question 18

Figure 15.1: The Labor Market  a.  and  d.  b.  .
e.
None of these answers is correct.
c.  .
-In the stylized DSGE model, contrary to the Keynesian model, ________ government expenditure ________.

Accepted Answer

The answer of Figure 15.1: The Labor Market  a....

Question 19

Using the labor market in the stylized DSGE model, from workers' perspectives, which of the following would be beneficial to them?
i. A reduction in the sales tax rate
ii. A reduction in the income tax rate
iii. A reduction in TFP

Accepted Answer

From workers' perspectives, a reduction in income tax can increase their disposable income and a reduction in sales tax can increase their purchasing power. However, a reduction in TFP would decrease the demand for labor, leading to lower wages and fewer job opportunities, which is not beneficial to workers. Therefore, choices i and ii would be beneficial to workers, but choice iii would not be beneficial.

Question 20

Refer to the following figure when answering the following questions.
Figure 15.1: The Labor Market 
-Consider Figure 15.1, which is a representation of the labor market. If the state of Colorado decided to raise its sales tax rate, this would cause a shift from curve ________, because changes in taxes are ________ in the stylized DSGE model.

Accepted Answer

The answer of Refer to the following figure when answering...

Quiz 15: Dsge Models: the Frontier of Business Cycle Research

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 .

If the classical dichotomy holds a change in monetary policy, it and .

In 2003, Ireland reduced its corporate tax rate from 16 percent to 12.5 percent. In labor markets this would , which would .

In Belgium, the corporate tax rate is 33 percent, while in the Netherlands it is about 25 percent. In labor markets in the stylized DSGE model, you would expect , ceteris paribus, Because .

When taxes are included in the stylized DSGE model, with Cobb-Douglas production, labor demand is given by:

In the labor supply model , we can think of as .

When taxes are included in the stylized DSGE model, with Cobb-Douglas production, labor demand is given by:

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 .

Refer to the following figure when answering the following questions. Figure 15.2: The Labor Market -In the stylized DSGE model for the labor market displayed in Figure 15.2, with sticky wages, expansionary monetary policy would cause a move from because .

Sticky nominal wages can lead to:

In the stylized DSGE model's representation of labor markets, if corporate tax rates rise and TFP rises, real wages would:

A temporary increase in government spending , and a permanent increase in government spending .

In the stylized DSGE model, the variable that allows future events to affect the economy today is:

When consumption falls, ________ also tend(s) to fall.

In Figure 15.1, which is a representation of the labor market, a decrease in government expenditure is represented by:

Figure 15.1: The Labor Market a. and d. b. . e. None of these answers is correct. c. . -In the stylized DSGE model, contrary to the Keynesian model, government expenditure .

Using the labor market in the stylized DSGE model, from workers' perspectives, which of the following would be beneficial to them? i. A reduction in the sales tax rate ii. A reduction in the income tax rate iii. A reduction in TFP

Quiz 15: Dsge Models: the Frontier of Business Cycle Research

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 ________.

If the classical dichotomy holds a change in monetary policy, it ________ and ________.

In 2003, Ireland reduced its corporate tax rate from 16 percent to 12.5 percent. In labor markets this would ________, which would ________.

In Belgium, the corporate tax rate is 33 percent, while in the Netherlands it is about 25 percent. In labor markets in the stylized DSGE model, you would expect ________, ceteris paribus, Because ________.

When taxes are included in the stylized DSGE model, with Cobb-Douglas production, labor demand is given by:

In the labor supply model , we can think of ________ as ________.

When taxes are included in the stylized DSGE model, with Cobb-Douglas production, labor demand is given by:

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 ________.

Refer to the following figure when answering the following questions. Figure 15.2: The Labor Market -In the stylized DSGE model for the labor market displayed in Figure 15.2, with sticky wages, expansionary monetary policy would cause a move from ________ because ________.

Sticky nominal wages can lead to:

In the stylized DSGE model's representation of labor markets, if corporate tax rates rise and TFP rises, real wages would:

A temporary increase in government spending ________, and a permanent increase in government spending ________.

In the stylized DSGE model, the variable that allows future events to affect the economy today is:

When consumption falls, ________ also tend(s) to fall.

In Figure 15.1, which is a representation of the labor market, a decrease in government expenditure is represented by:

Figure 15.1: The Labor Market a. and d. b. . e. None of these answers is correct. c. . -In the stylized DSGE model, contrary to the Keynesian model, ________ government expenditure ________.

Using the labor market in the stylized DSGE model, from workers' perspectives, which of the following would be beneficial to them? i. A reduction in the sales tax rate ii. A reduction in the income tax rate iii. A reduction in TFP

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 .

If the classical dichotomy holds a change in monetary policy, it and .

In 2003, Ireland reduced its corporate tax rate from 16 percent to 12.5 percent. In labor markets this would , which would .

In Belgium, the corporate tax rate is 33 percent, while in the Netherlands it is about 25 percent. In labor markets in the stylized DSGE model, you would expect , ceteris paribus, Because .

In the labor supply model , we can think of as .

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 .

Refer to the following figure when answering the following questions. Figure 15.2: The Labor Market -In the stylized DSGE model for the labor market displayed in Figure 15.2, with sticky wages, expansionary monetary policy would cause a move from because .

A temporary increase in government spending , and a permanent increase in government spending .

Figure 15.1: The Labor Market a. and d. b. . e. None of these answers is correct. c. . -In the stylized DSGE model, contrary to the Keynesian model, government expenditure .