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

Electric current, if 36C of charge pass through a wire in 4 seconds what cu...

if 36C of charge pass through a wire in 4 seconds what current is it carrying

Illustrate the characteristics of a sound note, Illustrate the characterist...

Illustrate the characteristics of a sound note. What do you mean by Resonance? Illustrate with an example.

Illustrate the polarity of barrier potential, Illustrate the polarity of Ba...

Illustrate the polarity of Barrier potential. The  free  electrons  which  cross  over  the  junction  recombine  with  the holes of p-type and uncover some of the negative ac

What is the distance from the slit to the screen - optics, Violet light (λ ...

Violet light (λ = 415 nm) falls on a slit that is 0.040 mm wide. The distance among the centers of the central bright band and the third-order dark band is 18.7 cm. What is

What is Neural coding? Explain Neural coding, Neural coding is a neuroscien...

Neural coding is a neuroscience based field mainly concerned with characterizing the relationship b/w the stimulus & the individual and ensemble neuronal responses or the relations

Moment calculation, This depends on the arrangement of a beam or column. fo...

This depends on the arrangement of a beam or column. for a simply supported beam with a point load in the centre of the beam Mmax = WL/4 and will occur at centre span W is the lo

Gauss law, Gauss' law (K.F. Gauss): The electric flux by a closed surf...

Gauss' law (K.F. Gauss): The electric flux by a closed surface is proportional to the algebraic sum of electric charges contained in that closed surface; in differential form,

Determine the current flowing by each resistor, For the series-parallel arr...

For the series-parallel arrangement shown in Figure, find (a) The supply current, (b) The current flowing by each resistor and (c) the p.d. across each resistor

Coordinate system for circular motion, Coordinate System for Circular Motio...

Coordinate System for Circular Motion In physics and circular motion is a movement of an object that was along the circumference of a circle or rotation along a circular path.

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