DSGE Models Are

question 17

Multiple Choice

DSGE models are

• A)similar to RBC models but allow for shocks other than productivity shocks.
• B)similar to RBC models, but government spending shocks play a major role.
• C)similar to Keynesian models except in the long run.
• D)similar to Keynesian models except in the short run.

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Definitions:

Diminishing Marginal Product

The principle that says the marginal product of a factor of production decreases as the quantity of the factor is increased, holding all else constant.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the scale of production and the cost per unit of production decrease.

Average Total Cost

The total cost of production divided by the number of units produced, representing the per-unit cost of production.

Total Revenue

The total income generated by a company from the sale of goods or services before any expenses are subtracted.