(f) Assume that > 0, 0 = 1, B(T) 0 (for all T), and that the...

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(f) Assume that > 0, 0 = 1, B(T) 0 (for all T), and that the government balances its budget by means of lump-sum taxes. Show that an increase in the money growth rate leads to a steady state increase in consumption and the capital stock but causes an ambiguous effect on real money balances. Explain the intuition behind your results. = (g) Make the same assumption as in part (f) and derive the long-run effects on capital, consumption, and real money balances of a tax-financed increase in government consumption. Explain the intuition behind your results. (f) Assume that > 0, 0 = 1, B(T) 0 (for all T), and that the government balances its budget by means of lump-sum taxes. Show that an increase in the money growth rate leads to a steady state increase in consumption and the capital stock but causes an ambiguous effect on real money balances. Explain the intuition behind your results. = (g) Make the same assumption as in part (f) and derive the long-run effects on capital, consumption, and real money balances of a tax-financed increase in government consumption. Explain the intuition behind your results.

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f Given that 0 1 B T 0 for all t and the government balances its budget by means of lump sum taxes the steady state equilibrium for consumption and the capital stock can be expressed as Cons umption C ... View the full answer