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

The galvanometer records a current , A galvanometer together with an unknow...

A galvanometer together with an unknown resistance in series is linked across two identical batteries each of 1.5V. whenthese batteries are connected in series the galvanometer rec

What is a newton meter, What is a Newton meter? A unit of energy also c...

What is a Newton meter? A unit of energy also called a Joule. When a force of 1 Newton is applied on an object for a distance of 1 meter then 1 Joule of energy is used. It is t

Derive the conservation law, Suppose a fluid (say, water) occupies a domain...

Suppose a fluid (say, water) occupies a domain D ⊂ R 3 and has velocity field V=V(x, t). A substance (say, a day) is suspended into the fluid and will be transported by the fluid

Kinematics, A CAR MOVING AT 25m/s ALONG A STRAIGHT LEVEL ROAD EXPERIENCE A ...

A CAR MOVING AT 25m/s ALONG A STRAIGHT LEVEL ROAD EXPERIENCE A RESISTANCE WHICH PRODUCES A RETARDATION OF 0.0001 V^3,WHERE V IS THE VELOCITY IN m/s.FIND THE DISTANCE TRAVELLED AND

Kinematics equation, A sprinter runs 100.0 m. If he travels at constant acc...

A sprinter runs 100.0 m. If he travels at constant acceleration of 1.95 m/s2 for the first 6.00 s, and then at constant velocity for the remaining time, what was his average veloci

Physics, What is Fresnel explanation of optical activity

What is Fresnel explanation of optical activity

Find refractive index by using total internal reflection, Q. Illustrate how...

Q. Illustrate how do you find the refractive index of a liquid by using total internal reflection? Answer:- Using Snell's law n (1) = (n (2) x sin angle (2)) / sin angl

Illustrate how do you convert from pascal to torr, Q. Illustrate how do you...

Q. Illustrate how do you convert from Pascal to torr? Answer:- Converting the Pascal to the torr The pascal is a slighter unit of pressure than the torr and there are 1

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