ECON 4721, Money & Banking

Reference: Modeling Monetary Economics (2016, Fourth Edition, Cambridge University Press) by Bruce Champ, Scott Freeman and Joseph Haslag.

Imagine an OLG economy where the government has to build roads and bridgestotaling a number of

Gtunitsoftheconsumptiongoodeachperiod.The government may finance its purchases by printing money with a rate ofexpansion of the fiat money supply of

z=1.0. Denote governmentconsumption per capita bygt=Gt/Nt where

Ntisthenumberofpeople born each period. Population grows constantly at rate

n=1.5.Each young person receives 114 units of the consumption good as labor income.Besides money, the agent may invest in capital k. Eachunitinvestedincapitalasyoungwillbecome

f(k)=Ak, where

A=1.2 and

=0.3when old. Find total GDP per capita in the stationary equilibrium. Round your answer to the closest integer.