Question

7 Exercises 9.1. Consider an economy with a constant population in which people wish to hold bank! checking deposits worth a total of 5,000 goods in every period. The economy has a total endowment of 10,000 goods in each period. There is a total stock of unintermediated capital of 1,000 goods in each period. Bank deposits are the only form of money in the economy. Deposits at banks are subject to a reserve requirement of 20 percent. The net real rate of return on capital is 10 percent per period. After meeting the reserve requirement, banks invest the remainder of all deposits into capital. Individuals do not hold capital. The fiat money stock (monetary base) is $2,000 in every period. Calculate values for the following variables: a. The price of a good in dollars). b. The gross real rate of return on deposits that will be offered by banks in a compet- m itive economy. c. The total nominal money stock MI. d. The money multiplier. e. The total capital stock. f. Real GDP. 1 1 10 noullid olid 02 Anwer each part of Exercise 9.1 assuming that the central bank allows banks to bor. In thi depo ther the F ther resu

Answer 1

pagert 80 To tai goods =500 Total Endocoment of goods = toooo. captial of goods = looo Reserde requirement percent = 204. real rate of return Caption =10 flat money stock = $2000 every period (a). Paice of P = a good Money stock geverse greqüaement Mcht - 2000 207. X5000 = 2000 0.20 X5000 = 2000 1000 (b) Jp =$20 goods/ Real rate of return on Deposit grew role of aretwna de +(1-1)}:10 =0.2011 +(1-0-26110

Pogeta 0-20+ C0-80.10 = 0.20+0.88 = 20.88 I real of setan = 20.88 @ Nomial money stock Me Mr = Mt = $2000 0.2 = $2000 9110 - $ 100010 I Nomial money stock M, = $10000 do Money multiption Yx= 1/0.2 =6 Money mutiplier =5 Total captial Stock Ky=1000+ (5000)0 80 @ = looo + 11000 >>10007 4000 Tofar captas stocks 50004 oods) o