A individual wants to manage its demand for monetary assets. The options available include a bank deposit that pays 15% interest but requires 2 hours of dedicated time at bank during work hours to withdraw money. The total transaction need is $10,000 and the hourly wage rate if $7 for the individual. Find the optimal visits to the bank and average amount that is kept at bank.
A individual wants to manage its demand for monetary assets. The options available include a bank deposit that pays 15% interest but requires 2 hours of dedicated time at bank during work hours to withdraw money. The total transaction need is $10,000 and the hourly wage rate if $7 for the individual. Find the optimal visits to the bank and average amount that is kept at bank.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Question 3:
A individual wants to manage its demand for monetary assets.
The options available include a bank deposit that pays 15%
interest but requires 2 hours of dedicated time at bank during
work hours to withdraw money. The total transaction need is
$10,000 and the hourly wage rate if $7 for the individual. Find
the optimal visits to the bank and average amount that is kept
at bank.
The economy is experiencing high inflation and the Governor
State Bank makes the following observations. The Growth of
Money Supply is 40%, the growth of income Y is 10% and
growth in nominal interest rate is 20%. The interest rate
elasticity is -0.1 and income elasticity is 0.5. What is the
current inflation, and what should be the new value of money
growth if Governor wants inflation to be 2%.
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