Eurozone and issuesits own currency

Assignment Help Macroeconomics
Reference no: EM131263740

Consider a standard OLG model applied to the Eurozone where euro is onlyregional currency. Suppose the population of Eurozone is 1,000 people in each generationfor each period. Each young person wants money balances worth 50 goods. There are2,000 euros circulating.

(a) Find the value of a euro and the consumption of the initial old.

(b) Suppose following the "Brexit", Germany decides to quit the Eurozone and issuesits own currency. The population of Germany is 50 in each generation. Eachyoung German wants money balances worth 50 goods. Germany issues 100 marksto circulate. If both the euro and mark are each accepted across Eurozone andGermany, what will the exchange rate be? If the value of a euro does not change,can we guarantee that the German mark will circulate without foreign exchangecontrols.

(c) Suppose Germany and the rest of Eurozone imposes foreign exchange controls.Assume the German central bank gives 100 marks to and distributes evenly amonginitial old. Find the value of a euro and the value of a mark. Find the consumptionof the initial old in the Eurozone and in Germany. Who has been made betteroff or worse off due to "Dexit", i.e., German leaving Eurozone? (Hint: rememberwhen the Dexit happens, each initial old still holds the same amount of euros asbefore.)

Reference no: EM131263740

Questions Cloud

Analyze the process map and sipoc model : Analyze the process map and SIPOC model to identify possible main root causes of the problems. Next, categorize whether the main root causes of the problem are special causes or common causes.
Calculate john maximum weekly profit : John's Lawn Mowing Service is a small business that acts as a price taker. How many acres should John choose to mow in order to maximize profits? Calculate John's maximum weekly profit
Recycler of aluminum cans : John's annual accounting profit is $1750, he could earn $1,000 a year as a recycler of aluminum cans, however he prefers to pay $275/year to run the cafe rather than recyle, is the cafe making an economic profit?
Discuss and explain the death penalty : Discuss and explain the death penalty. Include in your comments if you support the death penalty, opposed to use of the death penalty, or undecided.
Eurozone and issuesits own currency : Suppose following the "Brexit", Germany decides to quit the Eurozone and issuesits own currency. The population of Germany is 50 in each generation. Eachyoung German wants money balances worth 50 goods.
What is operating capital and why is it important : If a"typical"firm reports $20 million of retained earnings on its balance sheet, can the firm definitely pay a $20 million cash dividend? What is operating capital, and why is it important?
Amounts of mystery novels that randy sells : Explain why the total fixed cost is the same, or constant, for all amounts of mystery novels that Randy sells.
What are your biggest strengths as a leader : What are your biggest strengths as a leader? What are your biggest areas for improvement as a leader? Would say that your job as a leader in your organization is a big part of your identity Yes why or why not?
Formula for the area of a triangle : The price at pointdis $50 per bag. The price at pointeis $30 per bag. The price at point fis $42 per bag. The price at pointgis $14 per bag. Apply the formula for the area of a triangle (Area = ½ × Base × Height) to answer the following questions?

Reviews

Write a Review

Macroeconomics Questions & Answers

  Effect of importing second hand clothes

What is the effect of importing second hand clothes on the economy of developing countries?

  Calculate both arc and point elasticities of commodity

a) Define elasticity of supply and briefly explain any five factors that influence the elasticity of supply. b) Explain why elasticity of supply for agricultural commodities is low.

  Which economic systems would be most suitable for a country

Which economic systems would be most suitable for a country: centrally planned, mixed economy, or market economy? Since Canada is the #1 trading partner with the USA, focus specifically on Canada.

  Why should government consider to increase tax on cigarette

Why should the government consider to increase tax on cigarette

  Price elasticity of demand using mid point formula

Graph the accompanying demand data, and then use the midpoint formula for E d to determine price elasticity of demand for each of the four possible $1 price changes.

  Discuss the japanese government and the cutting taxes

Some economists believe that Fiscal Policy can affect swings in the business cycle. Looking back to the book, it discusses the Japanese government and their government cutting taxes.

  Calculate the present valuepat time zero

An investor has a series of three $15,000 payments expected to be realized at the end of years three, four, and five. Calculate the present valuePat time zero and the corresponding future valueFat the end of year 7.

  Find the rank in economic freedom of the countries

Find the rank in economic freedom of the countries and find the rank in business, trade, financial freedom, and property rights of the countries.

  Important role in its economic status

List and explain reasons why the health status of a country plays an important role in its economic status and create a table that shows how the access, quality, and cost of health care are influenced by the low-income, middle-income, and high-inco..

  Explain how economics does apply to this issue by developing

Some people claim the “economic way of thinking” does not apply to issues such as health care.  Explain how economics does apply to this issue by developing a “model” of an individual’s choice

  Activities of the employee benefit system

Alice has a high regard for privacy and wants the system to have employeesregister and give permission to obtain financial amounts from the dental insurance and retirementcompanies. Draw a use case diagram, context-level data flow diagram represen..

  Chemco corporation is a chemical company the research and

chemco corporation is a chemical company. the research and development manager is trying to decide whether or not to

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd