Principles of Macroeconomics 2e
2nd Edition
ISBN: 9781947172388
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 14, Problem 7RQ
What are the four functions that money serves?
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Consider the simple discrete job search model that we studied in class. Only the
unemployed can receive one offer per period from F(w) that is a uniform distribution on
[0,2]. There is a constant probability of being laid off at the end of each period while
employed. Assume that she can get a new offer right away when laid off. We want to
understand the reservation wage, WR, in this model. Assume that u(c) = c. The
parameters are a discount factor ẞ and an unemployment benefit b.R and show that T is contraction on [0, ∞). Explicitly state
any additional assumptions that you may need.(Grading guide line: 5pt for the
exact form of T, 10pt for showing contraction, and 5pt for stating correct
assumptions.)<
(b) Discuss why (a) is useful to understand the reservation wage wд in this
economy.<
(c) We write WR = WR (b,ẞ,λ) to reveal its dependence on (b,ẞ,λ). Show that 0 ≤
aWR
дь
OWR
дл
≤1 and ≥0. What about ?
awR
ав
State any additional assumptions that you may need.<
(d) Briefly explain the…
Chapter 14 Solutions
Principles of Macroeconomics 2e
Ch. 14 - In many casinos, a person buys chips to use for...Ch. 14 - Can you name some item that is a store of value,...Ch. 14 - If you are out shopping for clothes and books,...Ch. 14 - For the following list of items, indicate If they...Ch. 14 - Explain why the money listed under assets on a...Ch. 14 - Imagine that you are in the position of buying...Ch. 14 - What are the four functions that money serves?Ch. 14 - How does the existence of money simplify the...Ch. 14 - What is the double-coincidence of wants?Ch. 14 - What components of money do we count as part of...
Ch. 14 - What components of money do we count in M2?Ch. 14 - Why do we call a bank a financial intermediary?Ch. 14 - What does a balance sheet show?Ch. 14 - What are a banks assets? What are its liabilities?Ch. 14 - How do you calculate a banks net worth?Ch. 14 - How can a bank end up with negative net worth?Ch. 14 - What is the asset-liability time mismatch that all...Ch. 14 - What is the risk if a bank does not diversify its...Ch. 14 - How do banks create money?Ch. 14 - What is the formula for the money multiplier?Ch. 14 - The Bring it Home Feature discusses the use of...Ch. 14 - Imagine that you are a barber in a world without...Ch. 14 - Explain why think the Federal Reserve Bank tracks...Ch. 14 - The total amount of U.S. currency in circulation...Ch. 14 - Explain the difference between how you would...Ch. 14 - Should banks have to hold 100 of their deposits?...Ch. 14 - Explain what will happen to the money multiplier...Ch. 14 - What do you think the Federal Reserve Bank did to...Ch. 14 - If you take 100 out of your piggy bank and deposit...Ch. 14 - A bank has deposits of 400. It holds reserves of...Ch. 14 - Humongous Bank is the only bank in the economy....
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