Consider a money-in-the-utility function model with, Ask an Expert

Economics

Consider a money-in-the-utility function model with inelastic supply of labor. Suppose that preferences are given by:

Where and . The household budget constraint is:

Output is produced according to a classical Cob-Douglass production function with constant productivity ( ). Suppose that nominal money supply grows at the rate and it's deviation from steady state ( ) evolve according to:
Where

a) Define and characterize the competitive equilibrium
b) Solve for a steady state of the economy. Is money super-neutral in this model? Why?
c) Derive the money demand function.
d) describe the propagation mechanisms of the model.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M974979

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