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tutorial6questions - cash-in-advance CIA constraint 1 i...

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EC2102 Macroeconomic Analysis I Tutorial 6, Week 10, March 21-25, 2011 Question 1 Let us consider the monetary intertemporal model studied in class. Suppose that the economy is initially in an equilibrium. Equilibria in the labour, goods, and money markets in time period 1 are illustrated below. Determine the e/ects of an expected increase in tomorrow°s TFP on current (time period 1°s) real output, real employment, the real wage, the real interest rate, and the price level. Explain your results carefully and in detail. Question 2 (Sem I AY2005/2006 EC2102 Final Exam Question 2) Consider the monetary intertemporal model that we studied in class where there is a
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Unformatted text preview: cash-in-advance ( CIA ) constraint. 1 ( i ) List the three properties that money must have? ( ii ) Write down the cash-in-advance constraint for time period t , making sure you have carefully de&ned all the variables used. Which of the three properties of money listed in part ( i ) is the de&ning characteristic of money in this model? ( iii ) What is the representative consumer±s budget constraint in time period t ? ( iv ) Why is the representative consumer±s budget constraint in time period t di/erent from his cash-in-advance constraint in time period t ? 2...
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