In DGSE Models, the Dynamics of How Macro Variables React

question 21

Multiple Choice

In DGSE models, the dynamics of how macro variables react to a policy shock is called:

• A) the estimated coefficient.
• B) transition dynamics.
• C) an impulse response function.
• D) a policy response function.
• E) Ricardian equivalence.

---

Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance.

AVC

Stands for Average Variable Cost, which is the total variable costs divided by the quantity of output produced.

Total Revenue

The sum of income a company receives from its business activities, usually from the sale of goods and services to customers.

Shutdown Point

The level of production and price at which a company's revenue is just enough to cover its variable costs, making it indifferent between continuing operations and shutting down.