Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 15, Problem 12QP
To determine
The relationship between the stock prices and interest rates.
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John has the following utility function U(C₁, C2) = min{c₁ + ac2, C2}, where
C₁ and c₂ are his consumption in periods 1 and 2, respectively and a is some
positive constant. Suppose John has $100 income in period 1 and $105 income
in period 2. Prices in both periods are $1.
Question 2 Part al
Suppose a = 2. If John can freely borrow and lend at 5% interest rate what
would be his optimal consumption in both periods?
1
Question 2 Part a2
Suppose a = 2. Now, John can lend at 5% interest rate, but can't borrow at
all. What would be his optimal consumption in both periods?
Question 2 Part bl
Suppose a 0.5. If John can freely borrow and lend at 5% interest rate what
would be his optimal consumption in both periods?
Question 2 Part b2
Suppose a 0.5. Now, John can lend at 5% interest rate, but can't borrow.
What would be his optimal consumption in both periods?
Chapter 15 Solutions
Macroeconomics
Ch. 15.1 - Prob. 1STCh. 15.1 - Prob. 2STCh. 15.1 - Prob. 3STCh. 15.4 - Prob. 1STCh. 15.4 - Prob. 2STCh. 15.4 - Prob. 3STCh. 15 - Prob. 1QPCh. 15 - Prob. 2QPCh. 15 - Prob. 3QPCh. 15 - Prob. 4QP
Ch. 15 - Prob. 5QPCh. 15 - Prob. 6QPCh. 15 - Prob. 7QPCh. 15 - Prob. 8QPCh. 15 - Prob. 9QPCh. 15 - Prob. 10QPCh. 15 - Prob. 11QPCh. 15 - Prob. 12QPCh. 15 - Prob. 13QPCh. 15 - Prob. 14QPCh. 15 - Prob. 15QPCh. 15 - Prob. 16QPCh. 15 - Prob. 17QPCh. 15 - Prob. 18QPCh. 15 - Prob. 1WNGCh. 15 - Prob. 2WNGCh. 15 - Prob. 3WNGCh. 15 - Prob. 4WNGCh. 15 - Prob. 5WNGCh. 15 - Graphically portray the Keynesian transmission...Ch. 15 - Prob. 7WNGCh. 15 - Prob. 8WNG
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