An individual wants to manage its demand for monetary assets. The options available include a bank deposit
Question:
An individual wants to manage its demand for monetary assets. The options available include a bank deposit that pays 15% interest but requires 2 hours of dedicated time at the bank during work hours to withdraw money. The total transaction needed is $10,000 and the hourly wage rate if $7 for the individual. Find the optimal visits to the bank and the average amount that is kept at the bank. (5) The economy is experiencing high inflation and the Governor State Bank makes the following observations. The Growth of Money Supply is 40%, the growth of income Y is 10% and the growth in nominal interest rate is 20%. The interest rate elasticity is -0.1 and the income elasticity is 0.5.
What is the current inflation, and what should be the new value of money growth if Governor wants inflation to be 2%?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill