Consider a model economy in which each young person receives 200 units of the consumption good. There are 50 young people born each period. The total stock of fiat money is constant and equal to $10,000. Suppose a person's preferences are such that they only want to consume when old and they dislike risk. We assume the probability that a person moves is 10 percent. The gross return on capital is 1.10. A bank accepts deposits from all young people. a. What is the state contingent rate of return oşered by banks on deposits? b. Write down the money market-clearing condition for this economy. c. Compute the equilibrium value of money for this economy. [Champ, Bruce/Freeman, Scott/Haslag, Joseph. Modeling Monetary Economies]

Consider a model economy in which each young person receives 200 units of the consumption good. There are 50 young people born each period. The total stock of fiat money is constant and equal to $10,000. Suppose a person's preferences are such that they only want to consume when old and they dislike risk. We assume the probability that a person moves is 10 percent. The gross return on capital is 1.10. A bank accepts deposits from all young people. a. What is the state contingent rate of return oşered by banks on deposits? b. Write down the money market-clearing condition for this economy. c. Compute the equilibrium value of money for this economy. [Champ, Bruce/Freeman, Scott/Haslag, Joseph. Modeling Monetary Economies]

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance

Section: Chapter Questions

Problem 1.1P

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