Consider two identical countries, a and b, in our standard overlapping generations model. In each country, the population of every generation is 200 and each young person wants money balances worth 50 goods. Assume that the money of country "a" is the only currency that currently circulates in the two countries. There are $800 of country "a" money split equally among the initial old of both countries. 1) Find the value of a country "a" dollar and the consumption of the initial old. 2) Suppose country "b" issues its own money, givig £10 to each of the initial old of country "b". To ensure a demand for this currency, country "b" imposes foreign exchange controls. Find the value of a pound and the value of a dollar. Find the consumption of the initial old in country "a" and in country "b". Who has been made better off by this policy switch? This exercise is based on this book: "Modeling Monetary Economies, 3rd Edition". If you can solve this exercice by using the notions of this book it would be perfect for me. Thanks.
Consider two identical countries, a and b, in our standard overlapping generations model. In each country, the population of every generation is 200 and each young person wants money balances worth 50 goods. Assume that the money of country "a" is the only currency that currently circulates in the two countries. There are $800 of country "a" money split equally among the initial old of both countries. 1) Find the value of a country "a" dollar and the consumption of the initial old. 2) Suppose country "b" issues its own money, givig £10 to each of the initial old of country "b". To ensure a demand for this currency, country "b" imposes foreign exchange controls. Find the value of a pound and the value of a dollar. Find the consumption of the initial old in country "a" and in country "b". Who has been made better off by this policy switch? This exercise is based on this book: "Modeling Monetary Economies, 3rd Edition". If you can solve this exercice by using the notions of this book it would be perfect for me. Thanks.
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter31: Open-Economy Macroeconomics: Basic Concepts
Section: Chapter Questions
Problem 4PA
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