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

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.

What is Electrolytic cell, Normal 0 false false false E...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4 Normal 0

Earth and moon two are act as a two magnets., Earth and Moon two are act as...

Earth and Moon two are act as a two magnets. and when they rotating the flux changes . then the current produces or not . if not what is the reason? Ans) E.M.F is induced only whe

Physics, What is quarter wave plate? Give its theory

What is quarter wave plate? Give its theory

What force does every one exert, Regard as two charged particles. At a give...

Regard as two charged particles. At a given separation each one particle exerts a force of 12 N on the other. What force does every one exert on the other after someone moves the p

What is magnetic permeability , It is the degree or extent by which magnet...

It is the degree or extent by which magnetic lines of force can enter a substance and is expressed by µ.

Determine the voltage drop across each impedance, The following three imped...

The following three impedances are connected in series across a 40V, 20kHz supply: (i) a resistance of 8, (ii) a coil of inductance 130µHand5 resistance, and (iii) a 10 r

Light is able to travel through vacuum, Light is able to travel through vac...

Light is able to travel through vacuum Ans: In classical physics electromagnetic radiation (light) is the only kind of wave that doesn't need a medium. For sound rays in a

Explain metallization, Metallization: It is the process of giving electric...

Metallization: It is the process of giving electrical connections among different parts of the circuit. Aluminium is commonly used. It has a high electrical conductivity and a low

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