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

Calculate the maximum velocity, Figure shows a simple model of spring-mass ...

Figure shows a simple model of spring-mass system. The mass is released from the rest with the springs un-stretched. It's downward acceleration is a=9.81 - 15.24y m/s 2 where y is

What are fibers optics made of, What are fibers optics made of? For vis...

What are fibers optics made of? For visible light or lighting purposes spectrum transmission, several types of fibers are used. Glass in very suitable strands which have to be

With all the limitations, With all the limitations, what are the uses of fi...

With all the limitations, what are the uses of fiber optics? There is an ordinary misconception about the quantity of light required for a given task: more light is not essenti

Ultraviolet catastrophe, Ultraviolet catastrophe: A shortcoming of the...

Ultraviolet catastrophe: A shortcoming of the Rayleigh-Jeans formula, that tries to explain the radiancy of a blackbody at several frequencies of the electromagnetic spectrum.

Periodic motion, why phase is defined only for periodic motion ?

why phase is defined only for periodic motion ?

Copper is completely miscible with which matel, Copper is completely miscib...

Copper is completely miscible with (A) Nickel. (B) Gold. (C) Hydrogen. (D) Lead. Ans: Copper is completely miscible with gold.

Determine focal length of this entire system, Two positive lens L 1 and L ...

Two positive lens L 1 and L 2 has the same focal length f>0. The distance between them is f/2. L 1 is placed to the left of L 2 . (a) An object is placed to the left of L1 wi

Determine average value of poynting vector, Show that average value of Poyn...

Show that average value of Poynting vector for a plane e-m wave is  1/2 √μ/e XH 2 .

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