1. Consider the stationary equilibrium of the overlapping generations model with fiat money when the population is constant. a) Carefully setting up the budget constraints, characterize the equilibrium of the money market and derive an expression for the rate of return of fiat money in equilibrium. b) Use this model to illustrate the quantity theory of money. c) Suppose there is an additional asset in the economy, private loans. Discuss whether in equilibrium fiat money and private loans can coexist.

1. Consider the stationary equilibrium of the overlapping generations model with fiat money when the population is constant. a) Carefully setting up the budget constraints, characterize the equilibrium of the money market and derive an expression for the rate of return of fiat money in equilibrium. b) Use this model to illustrate the quantity theory of money. c) Suppose there is an additional asset in the economy, private loans. Discuss whether in equilibrium fiat money and private loans can coexist.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.1P

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