Question: In the monetary intertemporal model show that it is possible
In the monetary intertemporal model, show that it is possible to have an equilibrium where money is not held and only credit cards are used in transactions. Is there such a thing as a price level in this equilibrium? Does monetary policy work? If so, how? Explain your results and what they mean for actual economies.
Answer to relevant QuestionsThe government decides that the use of credit cards is bad, and introduces a tax on credit card balances. That is, if a consumer or firm holds a credit card balance of X (in real terms), he or she is taxed tX, where t is the ...Suppose that we allow for the fact that cash can be stolen, but assume that a stolen credit card cannot be used, as it is instantly cancelled, so no one steals credit cards. Determine the effects this has on the quantity and ...In the coordination failure model, suppose that consumers’ preferences shift so that they want to consume less leisure and more consumption goods. Determine the effects on aggregate variables in the good equilibrium and in ...Suppose that the goal of the fiscal authority is to set government spending so as to achieve economic efficiency, while the goal of the monetary authority is to achieve stability of the price level over the long run. Assume ...Suppose in the first model in this chapter that there is a limited commitment friction and the possibility the nation could default in the current or future periods. Suppose that, if the nation does not default, then the ...
Post your question