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In class, we derived the Baumol-Tobin money demand function under the assumption that at the beginning of each period, the individual receives his income in the form of an interest- bearing bank deposit. Suppose instead that the individual receives his income in his hand. The individual can still make trips to the bank and deposit money in an interest-bearing account. The only difference with the setting we discussed in class is that at the beginning of each period he receives his income in his hand rather than into the bank. The individual spends all of his income by the end of the period. Suppose that Y = 1000, i = 0.01, and C = 0.2, where Y , i, and C denote, respectively, income, the interest rate, and the cost of each trip to the bank. (a) Explain why it would not be optimal for the individual to make only one trip to the bank. (b) Write the formulas for the total cost of going to the bank 0 times and n times, where n is any integer other than 1. (c) Using a calculator or a spreadsheet, calculate the total cost when n takes the values 0, 2, 3, 4, 5, 6, 7, 8, 9, and 10. What is the number of trips that minimizes the cost? (d) Write the formula for the average money holdings for 0 trips and for n trips. (e) What are the average money holdings when the individual makes the optimal number of trips to the bank?
Suppose that the market for engagement rings is in equilibrium. Then political unrest in South Africa shuts down the diamond mines there. South Africa is the world's primary supplier of diamonds. What will happen.
Suppose that you save all of your money to spend next year. Explain how much will you be able to spend next year. How much will you be able to spend this year.
Make sure to include any important points or conversions. Please provide a copy of the article when turning in the paper so it can be reviewed.
They are all highly populated areas with target markets suitable for your products. One factor is which there several formidable competitors in all of the areas
A firm can determine how many resource units to acquire by comparing Marginal Revenue Product and Marginal Factor Cost, then continuing to acquire another unit so long as its MRP exceeds, or at least is no worse than, its MFC.
Price Elasticity of Demand and Price Elasticity of Supply at the equilibrium point.
Elucidate the impact does the dollar appreciation have on the firm's international competitiveness.
The Midterm Exam is open book, open notes. The maximum time that you can spend in the exam is three hours. If you have not clicked the Submit For Grade button by then, you will be automatically exited from the exam. In the exam environment
Explain why do cattle ranchers slaughtering a large number of newborn calves and burying them in mass graves rather than transporting them to markets.
suppose that the other firm holds its rate of output constant, solve for the optimal output of each firm. What is the total profits of the two firms.
Illustrate what do you conclude about the ability of these indexes to measure changes in real income.
here are many liquid cold medicines, all of which have almost exactly the same ingredients. Yet medicines with brand names that the man recognizes from television commercials are for more than the unadvertised versions. Elucidate in economic terms..
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