2. Consider the stationary equilibrium of the overlapping generations model with commodity money. Assume the population is constant. a) Characterize the equilibrium of the commodity money market and explain possible outcomes when the supply of commodity money doubles. b) Explain why replacing commodity money with fiat money is a Pareto improvement. c) Explain why it is impossible for a growing economy to simultaneously have constant money supply and constant nominal prices. Then discuss why maintaining constant prices in a growing economy is particularly difficult

2. Consider the stationary equilibrium of the overlapping generations model with commodity money. Assume the population is constant. a) Characterize the equilibrium of the commodity money market and explain possible outcomes when the supply of commodity money doubles. b) Explain why replacing commodity money with fiat money is a Pareto improvement. c) Explain why it is impossible for a growing economy to simultaneously have constant money supply and constant nominal prices. Then discuss why maintaining constant prices in a growing economy is particularly difficult

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

9) Refer to the following table. What was the approximate output gap in 1983? Year 1980 1981 1982 1983 1984 0.5% 1% 2.2% 2% Real GDP (billions of $) 175 182 189 196 202 Potential GDP (billions of $) 179 185 188 194 198
5. Suppose an economy is hit by a flood and its natural resources decreases. a) Show graphically using AD-AS model how the price level and output are affected in the short-run. b) Can the government use monetary policy to offset the effects on price level and output, explain?
Question 3 (Equilibrium) Since the Covid-19 crisis is nearing an end, the government is planning to phase out government spending programs. In other words government spending is expected to decrease. Explain how this would affect the equilibrium using the two period macroeconomic model that you have learnt (Draw the graph for the change in equilibrium and explain how the variables change). Show the changes in both the labor market and the goods market using the 2 step approach (direct and indirect effects) Discuss the changes in 1. Output Y 2. Output demand Yp 3. Output supply Ys 4. Labor N 5. Labor demand Np 6. Labor supply Ns 7. Interest rater 8. Wage w Feel free to make assumptions (about whether substitution effect is stronger than income effect, whether change in output demand is greater than change in output supply and so on.
4. Consider a two period model with investment Imagine a preference shock that increases the representative consumer's utility for leisure. Therefore, the consumer chooses to consume more current leisure and less current consumption, and more future leisure and less future consumption. (everything else is equal) given the initial real interest rate r; a) What effect this preference shock has on labor supply curve? b) What effect this preference shock has on labor demand curve? c) What effect this preference shock has on output supply curve?
5) Suppose that: Mp = 800 + 0.2Y – 5000(r + n) P M5 = 1000 + 0.1Y – 3000n a. If n = 0.1 ;r = 0.1 ;Y = 2000, in equilibrium, what is the price level? b. What is the velocity? (using the same parameters as in a.) c. If output increases so that Y = 3000, what is the price level? d. What is the velocity? What is the change rate of the velocity? What does this number mean? e. Now, if a = 0.1 ;Y = 2000; and price level is forced to be P = 6, what is the equilibrium interest rate? f. What is now the velocity?
Question 1 There are three policy variables that the government and the Bank of Zambia control that have a major influence on the economy. Draw small sketch graphs and quick indications of the effects on Y and i of each variable moving both up and down while holding the other policy variables constant (i.e. there are six situations to consider). The first one is done for you as an indication of how to do the others: 1. Increase in G IS-LM Model i IS LM, Y increases i increases IS: IS, Y
2. Suppose that a representative household is part of a two-period economy, with a commodity and a credit market. He holds no initial assets (bonds or money) and no final assets, by the end of the second period. Assume that, for some exogenous reason, the price level decreases at the beginning of period one, before consumption and labor effort decisions are made. This drop is expected to last forever. a) Do you expect this change to yield any real effect? More exactly, are real aggregate output demand (through consumption) or supply (through labor effort) affected? Explain why or why not. b) Imagine now that this household leaves a bequest to the next generation. As a result, a decision is made to hold a fixed real value of bonds (b2/P) by the end of the second period. These will be paid to the children of the household. Under these conditions, will there be any impact from the price level change over the individual consumption and labor effort choices of the representative household…
Question 1 There are three policy variables that the government and the Bank of Zambia control that have a major influence on the economy. Draw small sketch graphs and quick indications of the effects on Y and i of each variable moving both up and down while holding the other policy variables constant (i.e. there are six situations to consider). The first one is done for you as an indication of how to do the others: 1. Increase in G IS-LM Model i IS LM, Y increases i increases IS: IS. Y Your answers for the other 2 must not exceed 1 page.
Q1) It is highly likely that the projected retirement income based on the replacement ratio method may not be sufficient to pay for retirement expenses if inflation rates are _________ wage growth rates. Q2) Which of the following statements is false? a. If there are changes to an individual’s circumstances, the retirement plan should be reviewed. b. When developing a retirement plan, one should ensure that he has contingency funds and sufficient insurance protection. c. To better achieve one’s retirement funding objectives, the funding plan should not be modified under any circumstances. d. Regular reviews on the plan should be conducted to ensure that the retirement funding objectives are met. Q3) Mr. Clifton Chen, aged 39, recently purchased an endowment plan from an insurer that requires him to set aside $25,000 per year for the next 23 years till he retires at age 62. The first premium payment occurs at the beginning of the period. Assuming an inflation rate of 2% and an…
During an economic downturn, a nation's central bank decides to implement quantitative easing by purchasing large amounts of government securities to increase the money supply and encourage lending and investment. This policy action is intended to:A) Tighten the money supplyB) Increase interest ratesC) Stimulate economic growthD) Reduce public spending Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism.Answer completely and accurate answer.Rest assured, you will receive an upvote if the answer is accurate.
1. Explain the difference between Keynesian economics and Classical economics by mentioning the complete name of the economist who develops the theory/model. 2. Describe each of the components of the GNP equation and which one you feel can distort GNP the most.
which of the following are true statements about another growth model - the Quantitative Theory of Credit? [Multiple select] Credit creation drives nominal GDP growth and asset price inflation. Banks are only financial intermediaries between borrowers and lenders. Empirically, in the 20th century, the velocity of money is usually constant over time when money is defined as M0, M1. . .M5. A large ratio of Cr/C can lead to bank crashes and recession.