Describe, in general terms, how an economist calibrates a macroeconomic model. What statistics can be usefully examined to see how well the model corresponds to the data?
What will be an ideal response?
A model is calibrated by working out a detailed numerical example. First, write down a model of the economy with specific functions. Second, express the functions in numerical terms. Third, find out how the numerically specified model behaves when it is hit by random shocks. Fourth, compare the results of this simulation to the behavior of the actual economy to determine how well the model fits reality. Useful statistics in this comparison are the volatilities of key variables and their correlations with output.
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The term ______ refers to the size of the economic pie, and the term ______ refers to how the pie is divided
Fill in the blank(s) with correct word
Refer to the data. If this bank has excess reserves of $6 million, the legal reserve ratio must be:
Answer the question on the basis of the following balance sheet for the First National Bank of Bunco. All figures are in millions.
A. 10 percent.
B. 12 percent.
C. 14 percent.
D. 20 percent.