In the Smets-Wouters DSGE Model, a Positive TFP Shock Has

question 38

Multiple Choice

In the Smets-Wouters DSGE model, a positive TFP shock has an immediate ________ but ________.

• A) negative impact on hours worked; they start to rise after six quarters
• B) positive impact on real GDP; growth is negative in the longer run
• C) positive impact on inflation; leads to deflation later
• D) effect on unemployment; hours worked per worker remains the same
• E) negative impact on consumption; consumption grows later, as predicted by the permanent-income hypothesis

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Definitions:

Income Taxes

Taxes imposed by the government on the income generated by individuals or companies.

Initial Investments

The upfront sum of money invested in a project, business, or asset to start its operation.

Income Taxes

Taxes imposed by governments on the income generated by businesses and individuals within their jurisdiction.

Income Tax Expense

The total amount of income tax a company is obligated to pay to the government, reported as an expense in the income statement.