Write an equation expressing interest rate, Physics

Assignment Help:

Q. Assume an economy is in a liquidity trap.

A. Write an equation expressing interest rate parity under a fixed exchange rate regime.

Answer: Liquidity trap entail R = 0.  R = 0 = R* + (Ee - E)/E.

B. Assume Ee is fixed.  Suppose that the central bank raises the domestic money supply so as to depreciate the currency temporarily (that is, to raise E currently but return the rate to Ee later).  Show that E cannot be raised.

Answer:  Ever since R = 0 the equation in part A the interest parity condition implies E = Ee / (1- R*) as Ee and R* are fixed E can't change.


Related Discussions:- Write an equation expressing interest rate

How lots cph is able keep the spin of photon, As we know photon's spin is o...

As we know photon's spin is one, how lots CPH (that have spin) is able keep the spin of photon? Answer; the photon spin like electron spin comes up of its properties and indepe

Experiment a model elevator, A model elevator A working model of an ele...

A model elevator A working model of an elevator can simply be made from easy materials. For the rotating drums or sheaves, metal coffee tin will do. With a hammer and a big nai

Example on diffraction, Diffraction is the spreading of light that takes pl...

Diffraction is the spreading of light that takes place when it pass through a thin slit or small hole or passes by an obstacle Answer: Diffraction is the spreading of any k

Determine the maximum height the pinball rolls, Let's say I have a pinball ...

Let's say I have a pinball (solid sphere) with a given mass and radius, and it is held back at a certain distance from equilibrium on a spring. The spring constant k is given, and

Explain scanning process of scanning electron microscope, Explain about the...

Explain about the scanning process and image formation of scanning electron microscope. Scanning process and image formation of scanning electron microscope In a typical sca

How the neutron to proton ratio changes during alpha-decay, Describe, with ...

Describe, with the help of a nuclear reaction in each of the following cases, how the neutron to proton ratio alters during (i) alpha-decay (ii) beta-decay?

Principal ray for the case of an actual physical object, Which of the subse...

Which of the subsequent is a principal ray for the case of an actual physical object and a convex (converging) lens? Indicate all that apply. Ans: In the thin lens approxi

Write Your Message!

Captcha
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