Consider a model economy in which each young person receives 200 units of the consumption good. There are 50 young people born each period. The total stock of fiat money is constant and equal to $10,000. Suppose a person's preferences are such that they only want to consume when old and they dislike risk. We assume the probability that a person moves is 10 percent. The gross return on capital is 1.10. A bank accepts deposits from all young people. a. What is the state contingent rate of return oşered by banks on deposits? b. Write down the money market-clearing condition for this economy. c. Compute the equilibrium value of money for this economy. [Champ, Bruce/Freeman, Scott/Haslag, Joseph. Modeling Monetary Economies]

Consider a model economy in which each young person receives 200 units of the consumption good. There are 50 young people born each period. The total stock of fiat money is constant and equal to $10,000. Suppose a person's preferences are such that they only want to consume when old and they dislike risk. We assume the probability that a person moves is 10 percent. The gross return on capital is 1.10. A bank accepts deposits from all young people. a. What is the state contingent rate of return oşered by banks on deposits? b. Write down the money market-clearing condition for this economy. c. Compute the equilibrium value of money for this economy. [Champ, Bruce/Freeman, Scott/Haslag, Joseph. Modeling Monetary Economies]

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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PartA
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