Trevon is skeptical that DSGE models, and the RBC model upon which they are based, will be able to help policymakers respond to the next economic downturn if that downturn is caused by disturbances in financial markets. Explain to a friend, who has no training in economics, why Trevon is skeptical.

Trevon is skeptical that DSGE models, and the RBC model upon which they are based, will be able to help policymakers respond to the next economic downturn if that downturn is caused by disturbances in financial markets. Explain to a friend, who has no training in economics, why Trevon is skeptical.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, And Sources Of Business Cycles

Section: Chapter Questions

Problem 9E

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Opportunity Cost Analysis

Opportunity cost refers to the loss of potential benefits when choosing one alternative over another. It is the tradeoff a person makes, or the potential gains they miss out on, because of their choice. To analyze opportunity cost, we must consider the benefits and tradeoffs of each available option.

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Trevon is skeptical that DSGE models, and the RBC
model upon which they are based, will be able to
help policymakers respond to the next economic
downturn if that downturn is caused by disturbances
in financial markets. Explain to a friend, who has no
training in economics, why Trevon is skeptical.

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