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

Evaluate the least thickness for ordinary ray, A Plane polarized light...

A Plane polarized light is incident on a piece of quartz cut parallel to its axis. Evaluate the least thickness for which ordinary ray and extraordinary ray combine

Cadmium rods are provided in a nuclear reactor, Cadmium rods are provided i...

Cadmium rods are provided in a nuclear reactor. Why? Cadmium rods are given in nuclear reactors due to when we begin nuclear reactor then more energy is required for start the

Calculate the commutator-semiempirical formula, 1. A given radioactive samp...

1. A given radioactive sample emits only one type of radiation. When placed in a counter for 10 minutes, 1632 counts are registered. Then the sample is removed and a background

Anekardhi shabdh, list of anekardhi shabdh with examples

list of anekardhi shabdh with examples

Light, If the angle of incidence is 60 degrees,then what is the angle of de...

If the angle of incidence is 60 degrees,then what is the angle of deviation?

What do some fiber change the color of light, What do some fiber change the...

What do some fiber change the color of light? Actually, all fibers change the color of the light in one technique or other. Because of the physical characteristics of the condu

Calculate force and angle , If two forces P & Q act at such an angle that t...

If two forces P & Q act at such an angle that the resultant force r=p. Then show that if P is doubled the new resultant is at right angle Q and it's value is ( 4P 2 -Q 2 ) 1/2

Phenomenon of resonance, Phenomenon of resonance At resonance, rapid tr...

Phenomenon of resonance At resonance, rapid transfer of energy takes place resulting louder sound (booming sound). If two bodies having same natural frequency is placed side b

What is a fuse wire, Q. What is a fuse wire? i) Fuse wire is an alloy o...

Q. What is a fuse wire? i) Fuse wire is an alloy of lead 37% as well as tin 63%. It is linked in series in an electric circuit. ii) It has high resistance as well as low mel

Illustrates the branches of physics, Q. Illustrates the branches of physics...

Q. Illustrates the branches of physics? Answer:- The basic branches of physics are classical mechanics electromagnetism including thermodynamics, optics, relativity and qu

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