Consider the impulse response functions generated using the Smets and Wouters (2007) DSGE model, in response to a shock to productivity (TFP) and government expenditures as shown in Figures 15.8 and 15.9. The endogenous variables are consumption (c), inflation (pinf), labor supply (lab), and GDP (y). Briefly discuss the results of the simulations using macroeconomic theory.
Figure 15.8: Impulse Response Function to a Change in Productivity 
Figure 15.9: Impulse Response Function to a Change in Government Spending 
Definitions:
Continental Collision
A convergent plate boundary that involves the collision of two masses of continental crust.
Transform Faulting
The process of two tectonic plates sliding past each other along a transform fault, leading to significant horizontal displacement.
Seafloor Spreading
The process by which two oceanic plates move apart and new magmatic material is added between the plates.
Continental Rifting
The pulling apart of a continent, forming a low, fault-bounded trough (continental rift); may lead to a divergent plate boundary that leads to seafloor spreading and splitting apart a continent.
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