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

what is excatly phase? , Phase in sinusoidal functions or in waves has two...

Phase in sinusoidal functions or in waves has two different, but closely related, meanings. One is the initial angle of a sinusoidal function at its origin and is sometimes called

Define about the bell jar, Define about the Bell Jar? A vessel with a s...

Define about the Bell Jar? A vessel with a small hole of diameter d in it is delegate inside a high-vacuum chamber. The pressure is so low that the signify free path λ>> d.

Calculate the current through the circuit, Q. In the given circuit, calcula...

Q. In the given circuit, calculate the current through the circuit and mention its direction . Let the current be I. 5I + 10 I + 5 I = 10 + 20 that is 20 I = 30 Current I =

What is the size of the coefficient of static friction, A 9.0-kg crate sits...

A 9.0-kg crate sits on a level, rough floor. A 61-N force is required just to begin it moving. What is the size of the coefficient of maximum static friction?

Give the differences between hard x-rays and soft x-rays, Q. Give the diffe...

Q. Give the differences between hard X-rays and soft X-rays.

Determine the evaporation rate, An industrial process involves the evaporat...

An industrial process involves the evaporation of water from a liquid film that forms on a contoured surface. Dry air is passed over the surface, and from laboratory measurements t

Fresenl''s theory, explain fresenl''of optical rotations theory

explain fresenl''of optical rotations theory

Which way does the lower pedal move relative to the ground, A bicycle is su...

A bicycle is supported so that it is stopped from falling sideways but can move forwards or backwards; its pedals are in their highest and lowest positions. A student crouches

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