Consider two identical countries, a and b, in our standard overlapping generations model. In each country, the population of every generation is 200 and each young person wants money balances worth 50 goods. Assume that the money of country "a" is the only currency that currently circulates in the two countries. There are $800 of country "a" money split equally among the initial old of both countries. 1) Find the value of a country "a" dollar and the consumption of the initial old. 2) Suppose country "b" issues its own money, givig £10 to each of the initial old of country "b". To ensure a demand for this currency, country "b" imposes foreign exchange controls. Find the value of a pound and the value of a dollar. Find the consumption of the initial old in country "a" and in country "b". Who has been made better off by this policy switch? This exercise is based on this book: "Modeling Monetary Economies, 3rd Edition". If you can solve this exercice by using the notions of this book it would be perfect for me. Thanks.
Consider two identical countries, a and b, in our standard overlapping generations model. In each country, the population of every generation is 200 and each young person wants money balances worth 50 goods. Assume that the money of country "a" is the only currency that currently circulates in the two countries. There are $800 of country "a" money split equally among the initial old of both countries. 1) Find the value of a country "a" dollar and the consumption of the initial old. 2) Suppose country "b" issues its own money, givig £10 to each of the initial old of country "b". To ensure a demand for this currency, country "b" imposes foreign exchange controls. Find the value of a pound and the value of a dollar. Find the consumption of the initial old in country "a" and in country "b". Who has been made better off by this policy switch? This exercise is based on this book: "Modeling Monetary Economies, 3rd Edition". If you can solve this exercice by using the notions of this book it would be perfect for me. Thanks.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Consider two identical countries, a and b, in our
standard overlapping generations model. In each
country, the population of every generation is 200 and
each young person wants money balances worth 50
goods. Assume that the money of country "a" is the only
currency that currently circulates in the two countries.
There are $800 of country "a" money split equally
among the initial old of both countries. 1) Find the value
of a country "a" dollar and the consumption of the initial
old. 2) Suppose country "b" issues its own money, givig
£10 to each of the initial old of country "b". To ensure a
demand for this currency, country "b" imposes foreign
exchange controls. Find the value of a pound and the
value of a dollar. Find the consumption of the initial old
in country "a" and in country "b". Who has been made
better off by this policy switch? This exercise is based
on this book: "Modeling Monetary Economies, 3rd
Edition". If you can solve this exercice by using the
notions of this book it would be perfect for me. Thanks.
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education