Real interest rate if people instead are risk averse

Assignment Help Macroeconomics
Reference no: EM131270488

Consider a two-period OLG model. Population grows at a net rate of 2.5percent and the fiat money stock expands at 4.55 percent per period. Agents can holdfiat money with complete safety or to lend to someone who may never repay the loan.The chance of such a default is 10 percent. What net real interest rate will be charged to the borrower if people are risk neutral? What is the corresponding (net) nominal rate?What can you say about the level of the real interest rate if people instead are risk averse?

Reference no: EM131270488

Questions Cloud

Establishing a pricing strategy : Pricing is one part of the value equation in developing a marketing program. Discuss the methods available to marketers for establishing a pricing strategy. Analyze why each would be selected. Use at least one resource (cited in APA format) to sup..
Complete a truth table for the gate : A three-input AND-OR (AO) gate shown in Figure 1.42 produces a TRUE output if both A and B are TRUE, or if C is TRUE. Complete a truth table for the gate.
Create a class whose main method creates three arrays : Create a class whose main method creates three arrays. The first array will contain five kinds of flowers - petunia, pansy, rose, violet, and carnation.
Large scale bakery is laying out new production process : A large scale bakery is laying out a new production process for its packaged bread, which it sells to several grocery chains. it takes 12 minutes to bake the bread. how large of an oven is required so that the company is able to produce 4200 units of..
Real interest rate if people instead are risk averse : What net real interest rate will be charged to the borrower if people are risk neutral? What is the corresponding (net) nominal rate?What can you say about the level of the real interest rate if people instead are risk averse?
What ways have you kissed the earth with your feet lately : Which made me think of all of you and the journey we are on together to learn to preserve our beautiful planet. It also inspired me to share my favorite quote with you: "Walk as if you are kissing the earth with your feet" - Thich Nhat Hanh, Vietn..
Write java application that calculates the minimum for quiz : Write a Java application that calculates the minimum, maximum, and average for each quiz. Print the output results in a table format using a text area. Use loop and if statement control structures as well as Array data structure.
Explain why bcd might be a useful way to represent numbers : In a binary coded decimal (BCD) system, 4 bits are used to represent a decimal digit from 0 to 9. For example, 3710 is written as 00110111BCD.
Responsibility for maintaining ethical corporate governance : What steps can a corporation take to prevent agency problems and (b) in recent merger history, can you identify the role between management performance and takeover actions? (c) Does the financial manager have a greater responsibility or a lesser res..

Reviews

Write a Review

Macroeconomics Questions & Answers

  Halleys comet has a period of approximately 76 years and it

halleys comet has a period of approximately 76 years and it moves in an elliptical orbit in which its distance from the

  Application-jurisdictional aspects of cybercrime

You are using your wireless device to locate a restaurant. Suddenly, a large flashing skull-and-crossbones appears on your screen and a menacing laugh plays. Seconds later your device has been wiped clean. You are the victim of a cybercrime. If ca..

  Amount of a single variable input changes total output

What do we refer to a concept or a graph showing how a change in the amount of a single variable input changes total output?

  Explain economic relationship between china and singapore

Briefly explain the economic relationship between China and Singapore, The benefits Singapore gained from the China rapid economic growth

  Illustrate what are the benefits of free trade

Illustrate what are the benefits of free trade. Who are the winners and losers when the government imposes tariffs and quotas.

  Computing the equilibrium price and quantity

The Hull Petroleum Corporation and Inverted V are retail gasoline franchises that compete in local market to sell gasoline to customer.

  What is the equivalent single sum amount

What is the amount of the son's freshman year expense in terms of actual dollars? (b) What is the equivalent single sum amount at the present time for these college expenses?(c) What is the equal amount, in actual dollars, the father must save each y..

  Can a government always collect more seigniorage simply

Can a government always collect more seigniorage simply by letting the money sup- ply grow faster? Explain your answer.

  Day on the current balance

Jenny has a bank account on which simple interest is earned at 1¼% per annum on credit balances (Cr). The bank charges simple interest at 10% per annum on debit balances (Dr). Interest is calculated at the start of each day on the current balance ..

  Question regarding the aggregate demand

a) What would we expect this to do to aggregate demand? What component of AD (C, I, etc.) would the tax rebate impact most directly? Explain why. b) Is this an example of the use of fiscal policy or monetary policy?

  Elucidate how the enterprise zones could be utilized

Elucidate how the enterprise zones could be utilized to enhance the economic development implications of your policy issue.

  Accounting concepts relative to price management

write down the paper only to give a substantive feedback based on accounting concepts relative to price  management

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