Read Kiyotaki (1998). Consider the model in section 2 of the paper. Suppose there is no borrowing constraint (i.e., assume isarbitrarily large). Also assume that a = 1.2, 3=0.9, y = 1.05, 8 = 0.1, and n = 4. (The notations of variables and parametersfollow Kiyotaki (1998). Just in case, & denotes the lower case of Delta in the Greek alphabet.)Reference: Kiyotaki, N. (1998). "Credit and Business Cycles." The Japanese Economic Review, volume 49, issue 1, pages 18-35.(You can obtain a free electronic copy of this article through the university library's website. If you do not know how, please askthe librarians.)Answer the following questions.1.What is the equilibrium value of the net interest rate in the steady state? Enter your answer in the blank box below. (For example,if your answer is 5% in percentage points, then enter 0.05 in the blank box below.)2.Compute the ratio of aggregate borrowing (Bt+1/rt) to aggregate output (Yt + Y') in the steady state. (You can assume that thisratio is constant in each period in the steady state.)3.Submit the proof for your answer to Question 2

1. What is the equilibrium value of the net interest rate in the steady state? Enter your answer in the blank box below. (For example, if your answer is 5% in percentage points, then enter 0.05 in the blank box below.) 2. Compute the ratio of aggregate borrowing (Bt+1/rt) to aggregate output (Yt + Y') in the steady state. (You can assume that this ratio is constant in each period in the steady state.)

1. What is the equilibrium value of the net interest rate in the steady state? Enter your answer in the blank box below. (For example, if your answer is 5% in percentage points, then enter 0.05 in the blank box below.) 2. Compute the ratio of aggregate borrowing (Bt+1/rt) to aggregate output (Yt + Y') in the steady state. (You can assume that this ratio is constant in each period in the steady state.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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