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By Benjamin Eden

Книга A path in financial Economics: Sequential exchange, funds, and Uncertainity A direction in financial Economics: Sequential alternate, cash, and UncertainityКниги Экономика Автор: Benjamin Eden Год издания: 2004 Формат: pdf Издат.:Wiley-Blackwell Страниц: 424 Размер: 2 ISBN: 0631215662 Язык: Английский0 (голосов: zero) Оценка:Monetary Economics and Sequential alternate is an insightful advent to the complex themes in financial economics. available to scholars who've mastered the diagrammatic instruments of economics, it discusses actual concerns with various modeling possible choices, taking into consideration an immediate comparability of the consequences of different types. The exposition is obvious and logical, offering an exceptional starting place in financial conception and the ideas of monetary modeling. The textual content is rooted within the author's years of educating and learn, and should be hugely appropriate for financial economics classes in either the upper-level undergraduate and graduate degrees.

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The question is whether we want to adopt a policy of low money supply growth and low inflation or a policy of high money supply growth and high inflation. Most economists will favor the low money growth low inflation rate long run equilibrium. How low should we go? We will examine this question using a variety of models starting from the money in the utility function approach used among others by Patinkin (1965), Sidrauski (1967) and Friedman (1969). This approach assumes that money is held because it yields some services and the way to model it is to assume a utility function in which real balances enter as an argument.

14) and the market clearing condition l = L. 14) and obtain the equilibrium condition: f (L) = v (L). 15). 16 ^ L L Distortive income tax Efficiency: We now think of a hypothetical central planner who chooses L to maximize the welfare of the representative individual. The planner solves: max f (L) − v(L). 16). This means that the equilibrium outcome is efficient in the sense that a hypothetical planner cannot improve on it. Tax distortion We now introduce a government that collects income tax from the individuals and give it back to them as a transfer payment.

Yt + mt = Y¯ + mt−1 mt ≥ 0, and m0 is given. Find the first order conditions for this problem using the Lagrangian method. Answer The Lagrangian is: ∞ L= βt {U[Yt + f (mt−1 )] + λt (Y¯ − Yt + mt−1 − mt )} t=1 First order conditions: (a) ∂L/∂mt = βt+1 U (Ct+1 )f (mt ) + βt+1 λt+1 − βt λt = 0 (b) ∂L/∂Yt = βt U (Ct ) − βt λt = 0 From (b) we get: U (Ct ) = λt . Substituting this in (a) yields: (c) 1 + f (mt ) = U (Ct )/βU (Ct+1 ). MONEY IN THE UTILITY FUNCTION 51 In the steady-state: 1 + f (m) = 1 + ρ.

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