Let Nt = nNt−1 and Mt = zMt−1 for every period t, where z and n...

Let Nt = nNt−1 and Mt = zMt−1 for every period t, where z and n are both greater than 1. The money created each period is used to finance a lump-sum subsidy of a∗ goods to each young person.

(a) Find the equation for the budget set of an individual in the monetary equilibrium. Graph it. Draw an indifference curve that is tangent to the budget constraint and indicates the levels of c1 and c2 that would be chosen by an individual in this equilibrium.

(b) On the same graph, draw the feasible set. Take advantage of the fact that the feasible set line goes through the monetary equilibrium (c ∗ 1 , c∗ 2 ). Label your graph carefully, distinguishing between the budget and feasible sets.

(c) Briefly explain why the monetary equilibrium does not maximize the utility of the future generations by reference to the graph you produced.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Suppose we have an economy where the population is the same every period, Nt = N...

Suppose we have an economy where the population is the same every period, Nt = N and the money supply is increasing by z each period, i.e., Mt = zMt−1. The government uses the money it creates each period to finance a lump-sum subsidy of a ∗ goods to each old person. (a) (10 points) Find the equation for the budget set of an individual in the monetary equilibrium. Graph it. Show an arbitrary indifference curve tangent to the set...

Let f : Z × Z → Z be defined by f(n, m) = n −...

Let f : Z × Z → Z be defined by f(n, m) = n − m a. Is this function one to one? Prove your result. b. Is this function onto Z? Prove your result

let n belongs to N and let a, b belong to Z. prove that a is...

let n belongs to N and let a, b belong to Z. prove that a is congruent to b, mod n, if and only if a and b have the same remainder when divided by n.

1. T distribution with n degree of freedom is T=z/squart root (x/n) does that mean n-1...

1. T distribution with n degree of freedom is T=z/squart root (x/n) does that mean n-1 degree of freedom will be T=z/squart root (x/n-1) ? 2. what is the degrees of freedom. ????? please give me some examples follow the comments please.

Show that |N| = |Z|, where N is the set of natural numbers and Z is...

Show that |N| = |Z|, where N is the set of natural numbers and Z is the set of all integers.

Question 3- Consider an economy with a shrinking stock of fiat money. Let Nt = N,...

Question 3- Consider an economy with a shrinking stock of fiat money. Let Nt = N, a constant, and Mt = z Mt-1 for every period t, where z is positive and less than 1. The government taxes each old person t goods in each period, payable in fiat money. It destroys the money it collects. d. Find and explain the rate of return in a monetary equilibrium. e.Prove that the monetary equilibrium does not maximize the utility of the...

1. Let T : Mn×n(F) → Mn×n(F) be the transposition map, T(A) = At. Compute the...

1. Let T : Mn×n(F) → Mn×n(F) be the transposition map, T(A) = At. Compute the characteristic polynomial of T. You may wish to use the basis of Mn×n(F) consisting of the matrices eij + eji, eij −eji and eii. 2. Let A = (a b c d) (2 by 2 matrix) and let T : M2×2(F) → M2×2(F) be deﬁned asT (B) = AB. Represent T as a 4×4 matrix using the ordered basis {e11,e21,e12,e22}, and use this matrix to...

If n=35, t=2.07, what is the p-value? If z = -1, what is P(z > -1)?...

If n=35, t=2.07, what is the p-value? If z = -1, what is P(z > -1)? If z = -1, what is P(z < -1)? If x = 30 and n = 200, what is the proportion?

Let (Z, N, +, ·) be an ordered integral domain. Let {x1, x2, . . ....

Let (Z, N, +, ·) be an ordered integral domain. Let {x1, x2, . . . , xn} be a subset of Z. Prove there exists an i, 1 ≤ i ≤ n such that xi ≥ xj for all 1 ≤ j ≤ n. Prove that Z is an infinite set. (Remark: How do you tell if a set is infinite??)

Let S be the cone z = 4 − ( x^2 + y^2)^(1/2) where z ≥...

Let S be the cone z = 4 − ( x^2 + y^2)^(1/2) where z ≥ 0, oriented with downward pointing unit normal vectors. The image below contains S. The grey plane is the xy-plane. Let F~ (x, y, z) = <− z , x − y , x + y >. Use Stokes’ Theorem to evaluate Z Z S ∇ × F~ · dS~.

Subjects