Consider the monetary intertemporal model. Payments can be made with either credit cards or with money, and we denote the amount of transactions in real terms with credit cards as X. The bank is willing to supply credit card services as a function of Xs(q) where q is the cost per unit of credit. The money supply is given by Ms and the goods market and the labour market are as we described in the real intertemporal model Assume that the government introduces a tax on credit card services. That is, if a consumer or a firm holds a credit card balance of X, they are taxed tX where t is the tax rate. Determine the effects on the equilibriums price and the quantity of credit card services, the demand for money, and the price level
Consider the monetary intertemporal model. Payments can be made with either credit cards or with money, and we denote the amount of transactions in real terms with credit cards as X. The bank is willing to supply credit card services as a function of Xs(q) where q is the cost per unit of credit. The money supply is given by Ms and the goods market and the labour market are as we described in the real intertemporal model
Assume that the government introduces a tax on credit card services. That is, if a consumer or a firm holds a credit card balance of X, they are taxed tX where t is the tax rate. Determine the effects on the
Step by step
Solved in 3 steps
