Consider an economy with constant population

Assignment Help Business Economics

Reference no: EM131173893

Consider an economy with a constant population in which people wish to hold bank checking deposits worth a total of 5,000 goods in every period. The economy has a total endowment of 10,000 goods in each period. There is a total stock of unintermediated capital of 1,000 goods in each period. Bank deposits are the only form of money in the economy. Deposits at banks are subject to a reserve requirement of 20 percent. The net real rate of return on capital is 10 percent per period. After meeting the reserve requirement, banks invest the remainder of all deposits into capital. Individuals do not hold capital. The fiat money stock is $2,000 in every period. Assume that the central bank allows banks to borrow up to one half of required serves at a net interest rate of 8%.

Calucalte values for the follwing variables:

a. the price of a good

b. the gross real rate of return on deposits that will be offered by banks in a competitive economy

c. the total nominal money stock M1

d. the money multiplier

e. the total capital stock

f. Real GDP

Reference no: EM131173893

Questions Cloud

Describe the theoretical impact of these trends : Project 3 will consist of a review of the US currency trend, and its impact on trade. This paper should include the following points: Explain the currency trends relevant to US (appreciation versus depreciation or adjustments to pegged values. Descri..

Globe participated in gold-based exchange system : Bretton Woods was the last time a significant portion of the globe participated in a gold-based exchange system. Some economists and politicians, (Ron Paul, for example), believe that some type of gold standard should be reinstituted today. Do you ag..

Largest export partner and third largest source of imports : Canada currently is our largest export partner and third largest source of imports. In 2012, U.S. export of goods to Canada totaled $159 billion and U.S. imports from Canada totaled $176.9 billion.

Business communication-scenario on conflict : Linda Sims is the manager of the accounting department and Jose Martinez is the manager of the sales department for a production company. This is a fast growing firm, and the staff of the accounting department (11 employees) is often over whelmed wit..

Consider an economy with constant population : Consider an economy with a constant population in which people wish to hold bank checking deposits worth a total of 5,000 goods in every period. The economy has a total endowment of 10,000 goods in each period. The fiat money stock is $2,000 in every..

Double-breasting is legal under national labor relations act : Organized labor repeated its success in three previous presidential elections by delivering a very large majority of union members for Obama. The sit-down strike helped the CIO to obtain union membership in the 1930s, and it was soon approved by the ..

What is autonomous consumption and induced consumption : What is autonomous consumption? What is induced consumption? Suppose that the current consumption function for the nation is C = 500 + 0.8DI. What will happen to autonomous consumption if disposable income, DI, increases by 100? What will happen to i..

The property of diminishing marginal utility for both goods : Explain why it must be true that if a consumer's preferences satisfy the property of diminishing marginal utility for both goods (normal goods and inferior goods) that consumer's indifference curves for those goods will also be convex.

Arise in the international business setting : Identify the most common ethical issues that may arise in the international business setting. Explain the root cause of these issues. Discuss how managers of international firms should address these issues.

User Account

All Pages