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Assume that fiat money and capital are perfect substitutes as assets and that individuals wish to hold the one with a higher rate of return, but that it takes time to adjust capital holdings. In equilibrium individuals hold both assets. The real rate of return on money is n z , where n = 1 and z = Mt Mt−1 . The gross real rate of return on capital is f 0 (kt) = 100 kt . (a) What is the equilibrium level of capital when the money stock is constant? What is it when the money stock is doubled in every period? (b) What is the equilibrium nominal rate of return when the money stock is constant? What is it when the money stock is doubled in every period? (c) What are the immediate and long-run effects on capital holdings of an unanticipated increase in the growth rate of the money stock? (d) What does this model predict for the relationship between inflation and output? Does it matter whether inflation is anticipated or not? (e) How does your answer in part d differ from what the Lucas model predicts?
q1. a discount store has a special offer on dvd players and lowers their price from 150 to 100. assume the store
Explain how quantity of labour to be hired and wage rate would be determined if input market is perfectly competitive. output market may be either perfectly competitive or imperfectly competitive.
The source of Microsoft’s market power over the Windows operating system is a
Find out the equilibrium level of GDP. Next Find out the multiplier for government purchases also fixed taxes.
Is it possible to trade foreign exchanges in the future markets? How does such trading differ from the forward market?
How many hours will Bob want to work if his wage rate is less than his reservation wage ____? Graph this situation using the model of labor-leisure choice and explain. what would happen to bob's reservation wage if his mother started sending him $100..
Suppose a consumer derives satisfaction from consuming tacos: those from Taco Bell and those from Chipoltle. Graph the budget line of the consumer under the assumption that he is offered a buy three, get one free deal at Taco Bell (limit one free tac..
Ketchup is a complement (as well as a condiment) for hot dogs. If the price of ketchup decreases, using a supply and demand diagrams for hot dogs, show what happens to equilibrium price, equilibrium quantity for hot dogs, and total revenue for produc..
How can it be said that the factor-content approach “reveals” a country’s factor abundance? What assumptions seem crucial for making this inference? Explain.
Suppose investment I is 900, government purchases are 800, and net of exports are 300. What is the spending balance? What is the GDP multiplier?
A heat exchanger cost $7500 in 2005 and must be replaced soon with a larger unit. The present unit has an effective area of 250 feet and its replacement should have an area of 350 feet. Replacement is anticipated in 2015 when the price index is estim..
Why does this happen that Research the recent history of gasoline pricing in Texas, and attempt to relate any fluctuations you observe to documented supply and demand factors. Be sure to cite any references used.
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