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

Illustrate huygens principle, State and illustrate Huygens' principle. Expl...

State and illustrate Huygens' principle. Explain the consequences of total internal reflection.

Optical activiy, what is the fresnel''s exlanation of optical activity

what is the fresnel''s exlanation of optical activity

Describe pitch and image quality in msct, Question 1. Discuss the gener...

Question 1. Discuss the general guidelines to be followed for whole body CCT 2. Describe pitch and image quality in MSCT 3. List the advantages of SCT in pediatrics. Expl

Thermonuclear reactions, Thermonuclear reactions: The fusion reactions ...

Thermonuclear reactions: The fusion reactions which require extremely high temperatures are called thermonuclear reactions. The most important thermonuclear reactions take plac

Circuits involving capacitive decay, Circuits involving capacitive decay: ...

Circuits involving capacitive decay: Consider the circuit shown below. Depending on the time constant of the circuit, relative to the period of the square wave applied to it,

Parallel forces, .Define like and unlike parallel forces

.Define like and unlike parallel forces

Calculate the number density of iron atoms, An iron wire has a cross-sectio...

An iron wire has a cross-sectional area equal to 5.00×10-6m2. Carry out the following steps to determine the drift speed of the conduction electrons in the wire if it carries a cur

Write two characteristic features of nuclear force, Write two characteristi...

Write two characteristic features of nuclear force which differentiate it from the Coulomb force.

Moment of inertia of rigid bodies, Moment of Inertia of Rigid Bodies : For ...

Moment of Inertia of Rigid Bodies : For a continuous mass distribution like found in a hard object, we remove the summation of Eq. (ii) by an integral. If the object is separated i

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