Hw1 - Skelton Eco 3355 Homework 1 1. Assume an economy has...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Skelton Eco 3355 Homework 1 1. Assume an economy has a constant population of N = 100. Each individual is endowed with 20 units of the consumption good when young and nothing when old. A) What is the equation for the feasible set of this economy? Portray the feasible set on a graph. With arbitrarily drawn indifference curves, illustrate the stationary combination of c 1 and c 2 that maximizes the utility of future generations. B) Now, consider the monetary equilibrium. Write down equations that represent the constraints on first- and second-period consumption for a typical individual. Combine these constraints into a lifetime budget constraint. C) Suppose the initial old are endowed with M = 400 units of fiat money. What condition represents the clearing of the money market in an arbitrary period t? Use this to find the real rate of return for fiat money. For the rest of this problem, suppose preferences are such that individuals wish to hold real balances of money worth: y/(1+v t /v t+1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/18/2008 for the course ECON 3355 taught by Professor Skelton during the Spring '06 term at SMU.

Page1 / 2

Hw1 - Skelton Eco 3355 Homework 1 1. Assume an economy has...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online