In the Smets-Wouters DSGE Model, a Negative TFP Shock Will

question 28

Multiple Choice

In the Smets-Wouters DSGE model, a negative TFP shock will cause real GDP to ________ by ________.

• A) fall; more than the decline in the shock
• B) rise; more than predicted by empirical models
• C) not change; Okun's law
• D) fall; less than consumption
• E) fall; the same as the decline in inflation

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