Consider an economy inhabited by overlapping generations

Assignment Help Business Economics

Reference no: EM13998647

Consider an economy inhabited by overlapping generations of two-period-lived individuals, each of whom receives an endowment of y in the first period of life and none in the second. The population of newborns grows as follows: Nt = nNt−1, where n > 1. The money stock (the only asset in this economy) is constant. (a) Find the equation for the budget set of an individual in the monetary equilibrium. Graph it. Show an arbitrary indifference curve tangent to the budget set and indicate the levels of consumption c1 and c2 that would be chosen by an individual in this equilibrium. (b) On the figure from part a, draw the feasibility line. Label your graph carefully, distinguishing between the budget and feasibility constraints. (c) Does the monetary equilibrium maximize the utility of future generations? Support your assertion with references to your figure.

Reference no: EM13998647

Questions Cloud

What output level will yield the largest possible profit : A purely competitive firm finds that the market price for its product is $30.00. It has a fixed cost of $100.00 and a variable cost of $17.50 per unit for the first 50 units and then $37.50 per unit for all successive units. What is the average varia..

What is effect on deposit-to-currency ratio-nominal money : Consider an overlapping-generations model with inside and outside money, where the rate of return on inside money is x, while the rate of return on outside money is 1 z. What is the effect on the deposit-to-currency ratio, nominal money stock M1 and ..

Study of microeconomics and the study of macroeconomics : What is the difference between the study of microeconomics and the study of macroeconomics? Provide two examples of each form of economic analysis. Evaluate the following statement…”In order for a model to be useful, all assumptions used to create th..

What is the equilibrium level of capital when money stock : Assume that fiat money and capital are perfect substitutes as assets and that individuals wish to hold the one with a higher rate of return, but that it takes time to adjust capital holdings. In equilibrium individuals hold both assets. What is the e..

Consider an economy inhabited by overlapping generations : Consider an economy inhabited by overlapping generations of two-period-lived individuals, each of whom receives an endowment of y in the first period of life and none in the second. The population of newborns grows as follows: Nt = nNt−1, where n > 1..

Compute revenues and profits at each output rate : The following table depicts the daily output, price, and costs of a monopoly dry cleaner located near the campus of a remote college town. (See page 540.) Output (suits cleaned) Price per Suit ($) Total Costs ($) 0 8.00 3.00 1 7.50 6.00 2 7 .00 8.50 ..

Regarding citizenship status of senator ted cruz of texas : After your review of the United States Constitution, and in consideration of the controversy amongst Republican party Presidential nominees regarding the citizenship status of Senator Ted Cruz of Texas, is he indeed eligible to run for President of t..

The solow model focus on how resources affect output : The Solow model focus on how resources affect output. This module/week, you focused on capital. Name the other two major categories of resources. Draw an aggregate production function with a typical shape; label this function F.

Three alternatives for investing these funds : The Rule of 70 applies in any growth rate application. Let’s say you have $1000 in savings and you have three alternatives for investing these funds.

User Account

All Pages