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

Characterstics of loudness, The loudness of sound depends on: Ampl...

The loudness of sound depends on: Amplitude of vibration. Area of vibrating body. Distance from the sounding body. Density of the medium.

Electromagnetic induction, what is construction,,, principle...and working ...

what is construction,,, principle...and working of AC generator

What are the uses of an electron microscope, Q. What are the uses of an ele...

Q. What are the uses of an electron microscope? Uses of electron microscope: (i) It is utilized in the industry to study the surface of metals, structure of textile fib

Innovative proprietary ultrasonic technology cleaning effect, Define the cl...

Define the cleaning effects of innovative proprietary ultrasonic technology. Additionally, the pollution particles are dispersed in the cleaning liquid. By this, a new adhesion

What is illumination, What is Illumination? A body that gives off light...

What is Illumination? A body that gives off light is called luminous, like all those glow-in-the-dark toys, and a body that gives off light when it is heated is called incandes

GRAMMAR CHECK, And then did he sit up.IS THIS A SENTENCE OR A QUESTION

And then did he sit up.IS THIS A SENTENCE OR A QUESTION

Can you explain solenoidal field, Can you explain solenoidal field? Describ...

Can you explain solenoidal field? Describe with example?

Draw a labelled diagram of a moving coil galvanometer, Draw a labelled diag...

Draw a labelled diagram of a moving coil galvanometer. Verify the principle on which it works. Reduce an expression for the torque acting on a rectangular current carrying loop kep

Projectile, derive an expression for time of flight of horizontal projectil...

derive an expression for time of flight of horizontal projectile

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