intertemporal choices , Macroeconomics

) Consider an economy where individuals live for 2 periods and have prefer- ences represented by
ln(c) + ß ln(c')
where c and c' represent consumption in the first and second period, respectively. Income is denoted y in the first period and y' in the second. The real interest rate is denoted r.
(a) Whatistheequilibriumrateofinterestonthecreditmarket?Explainhowyou derived it.
(b) In a recession the rate of growth of income decreases, that is y'/y decreases. What does this model predict about the behavior of the interest rate in a re- cession? Why?
Posted Date: 11/28/2012 8:59:32 PM | Location : United States







Related Discussions:- intertemporal choices , Assignment Help, Ask Question on intertemporal choices , Get Answer, Expert's Help, intertemporal choices Discussions

Write discussion on intertemporal choices
Your posts are moderated
Related Questions
Relation between nominal interest rate, real interest rate and inflation If we denote the nominal interest rate by R, the real rate by r and the expected inflation by p e then

Long Run Equilibrium:Graphical Analysis In the long run the natural rate of output is the level of output to which the economy will tend to adjust in the long run. This indicat

What is Treasury bills In most countries you will find many types of government bonds. An important distinction is the duration of the bond, that is, the difference between the

How can an economy achieve mutual gain from International Trade?

A scientist has been studying the organisms colonising the pilings underneath a wharf in Sydney Harbour. He postulates two factors might make these communities of sponges, worms, a

This problem revolves around determining the LM curve, as we did earlier in the term such that money demand (M D ) equals money supply (M S ), however in this instance under differ

Functions of a Commercial Bank 1. Credit Creation Creation of credit is a major function of a commercial bank. When a bank creates credit or advances loans, there tends

Suppose that midterm grades determine your nal course grade putting the Midterm 1 grade on the horizontal axis and the Midterm 2 grade on the vertical axis, draw indifference curve

#question.distinguish between economic growth and economic development.

Use the points on the graph below to answer the following questions. i)   What is Ep along D1 (from A to B)? ii)  What is the Ep along D2 (from X to Y)? iii) What are