Error terms in DSGE models represent exogenous instances of these events. For 10 points each:
[10m] Name these economic events. A shift in the short-run aggregate supply curve is an example of one of these events.
ANSWER: shocks [accept supply shock; prompt on fluctuations; prompt on shortages]
[10e] A subclass of DSGE models incorporates shocks described by this adjective into a namesake class of “business cycle” models. Economic variables adjusted for inflation are described by this adjective, unlike “nominal” variables.
ANSWER: real [accept real shocks; accept real variables; accept real business-cycle theory]
[10h] DSGE models like real business-cycle models were further developed in response to this economist’s namesake “critique,” which argued that macroeconomic models wrongly treat agents’ behavioral parameters as stable.
ANSWER: Robert Lucas [accept Lucas critique]
<Editors, Social Science>