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

Force in two and three dimensions - pressure and fluids, Force in Two and T...

Force in Two and Three Dimensions - Pressure and Fluids Pressure is a force exerted over an area and is measured in Pascals (Pa). P (in Pa) = Force (in newtons) / area (

Michelson interferometer., why michelson interferometer is called interferr...

why michelson interferometer is called interferrometer

Unit and dimension, find the value of 10J when 1 kg,10cm,and 5 min is given...

find the value of 10J when 1 kg,10cm,and 5 min is given

What do you mean by dopplers shift, What do you mean by Doppler's shift? De...

What do you mean by Doppler's shift? Derive a mathematical expression for the apparent frequency heard by a moving listener when the source of sound is at rest. What is the effe

Determine the current taken by the capacitor, A motor has an output of 4.8k...

A motor has an output of 4.8kW, an efficiency of 80% and a power factor of 0.625 lagging when operated from a 240V, 50Hz supply. It is needed to improve the power factor to 0.9

What are the units of fibre optic communication system, What are the units ...

What are the units of fibre optic communication system? Fibre Optic Communication System: This comprises of the given three most important units: a. Transmitter: It has i

Has vc a limit, Has Vc a limit? Answer; precisely, but we do not know i...

Has Vc a limit? Answer; precisely, but we do not know its limit. But we know it is greater than c.

Mass as a measure of the amount of inertia, Mass as a Measure of the Amount...

Mass as a Measure of the Amount of Inertia: All objects resist alters in their state of motion because they have inertia. However some objects have more of a tendency to resist

Right-hand screw rule, Right-Hand Screw Rule In physics, the right-hand...

Right-Hand Screw Rule In physics, the right-hand rule is a general mnemonic for understanding notation conventions for vectors in 3 dimensions. It was invented for use in elect

Explain real ball bearings, Real ball bearings Study real ball bearings...

Real ball bearings Study real ball bearings and roller bearings. Make a list of devices that having ball bearings or roller bearings.

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