Impulse Response Functions Can Be Thought of As

question 17

Multiple Choice

Impulse response functions can be thought of as:

• A) an alternative way of looking at AS/AD.
• B) a substitute to the Solow model.
• C) accurately reflecting an economy's dynamics.
• D) an application of empirical estimates to understanding an economy.
• E) demonstrating how economies worldwide react to shocks.

---

Definitions:

Positive Externality

A beneficial effect experienced by a third party who did not choose to incur that benefit, often resulting from an individual's or firm's actions.

Corrective Tax

A tax designed to internalize externalities, effectively correcting market outcomes that might otherwise result in social inefficiency.

Command-And-Control Policies

Regulatory strategies where the government sets specific limits and controls on emissions or discharges, often requiring technology or methods to be used.

Corrective Taxes

Taxes imposed to correct the market outcomes by accounting for externalities and bringing the social costs and benefits into balance.