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

SAFA, Physics assignment electron microscopy component, solve problem. can ...

Physics assignment electron microscopy component, solve problem. can u solve these two problems with detailing and referencing if it needed

Explain vibratory and oscillatory motion, Vibratory and Oscillatory Motion ...

Vibratory and Oscillatory Motion : To and fro or back and forth motion of an object is known as vibratory and oscillatory motion.

Motion in one dimension, A packed parachute is dropped from rest from an ai...

A packed parachute is dropped from rest from an airplane. A daredevil is launched straight down rom the plane 3.00s later. Neglecting air resistance, the daredevil catches up to th

Laws of motion: find the time, A thin rod of length 1 m is fixed in a verti...

A thin rod of length 1 m is fixed in a vertical position inside a train, which is moving horizontally with constant acceleration 4 m/s2. A bead can slide on the rod, and friction c

Define stress, Stress is measured by the deforming force per unit normal ar...

Stress is measured by the deforming force per unit normal area. Stresses set up in an object due to of the action of forces can be divided into three broad categories (a) Ten

FREE FALL, CAN YOU GIVE SOME EXAMPLE OF FREE FALL ACTIVITIES

CAN YOU GIVE SOME EXAMPLE OF FREE FALL ACTIVITIES

Quantum mechanicm, compton effect and quantum nature of light

compton effect and quantum nature of light

Define space station pressure (mit), Define Space Station Pressure (MIT)? ...

Define Space Station Pressure (MIT)? A space station consists of a huge cylinder of radius Ro filled with air. The  cylinder revolve about its symmetry axis at an angular  spee

The screw is an inclined plane, The screw is an inclined plane Mark off...

The screw is an inclined plane Mark off and cut out a right angle triangle on a piece of white paper or a piece of wrapping paper. The triangle should be about 30 cm long on it

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