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

Gravitational Force Word Problems, A 2.5 kg rock is located on the Earth''s...

A 2.5 kg rock is located on the Earth''s surface. If the mass of the moon is 7.4 E 22 kg, and the separation distance between the center of the rock and the center of the moon is 3

Power for the circuit, a) A circuit has a voltage of 15V and a current of 2...

a) A circuit has a voltage of 15V and a current of 2A. the phase angle is 45 degree. Verify the true power of the circuit? (Calculate apparent and true power) b) Verify the appare

Classification of solid, what is classification of solid insulator , semico...

what is classification of solid insulator , semiconductor , conductor

Atomic physic, why rutherford''s atomic model is failure

why rutherford''s atomic model is failure

Balmer series, Balmer series (J. Balmer; 1885) An equation that describ...

Balmer series (J. Balmer; 1885) An equation that describes the emission spectrum of hydrogen while an electron is jumping to the second orbital; four of the lines are into the

Light, does lights of different wavelengths help us to see different colour...

does lights of different wavelengths help us to see different colour

Cooling by radiation, Assume a hot system at temperature T placed in an env...

Assume a hot system at temperature T placed in an environment at a lower temperature T0. The system emits more radiation than it absorbs and cools down whereas the surrounding abso

Is mechanical energy preserved in process, A disk defamation horizontally o...

A disk defamation horizontally on a frictionless, mass less, rotational motion support such that the disk is spinning freely about a vertical axis through the centre of the disk an

How is transmitter used in fibre optic communication system, How is transmi...

How is transmitter used in fibre optic communication system? Transmitter: This consists of analog to digital interface (driver). There, the input signal is converted within

Explain ultraviolet radiation, A metal has a work function of 4.80 eV. ...

A metal has a work function of 4.80 eV. Will ultraviolet radiation with a wave length of 385 nm be able to eject a photoelectron from the metal?

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