1. True/False/Uncertain (25 points total)

Please indicate whether the statement in each part is true, false, or uncertain given the information provided. You must briefly justify your answer, i.e. you will not receive full credit for simply stating the answer without an explanation.

(a) (9 points) In the real business cycle model, TFP shocks deliver comovement of business cycle aggregates.

(b) (8 points) In the New Keynesian business cycle model with rigid prices, TFP shocks cause a decline in labor demand in the short run.

(c) (8 points) Under optimal monetary policy, demand shocks cause an increase in desired consumption and hence an increase in the realized output gap.