4. Complete the steps in the derivation of the Fisher equation discussed on slide 17 of lecture 3 by showing that if we 1+i (a) Begin with = 1+r. 1+ 7 (b) Replace 1 with the Taylor-series expansion 1+ 7° 1 = 1- 7° + (7°)² - (7*)³ + (m*)ª – .. in the expression in part 4(a) above. (c) Assume that we can ignore any terms involving in“ or (7*)" for n > 2 because 7 is small. that we are left with the Fisher equation r = i – ".

4. Complete the steps in the derivation of the Fisher equation discussed on slide 17 of lecture 3 by showing that if we 1+i (a) Begin with = 1+r. 1+ 7 (b) Replace 1 with the Taylor-series expansion 1+ 7° 1 = 1- 7° + (7°)² - (7)³ + (m)ª – .. in the expression in part 4(a) above. (c) Assume that we can ignore any terms involving in“ or (7*)" for n > 2 because 7 is small. that we are left with the Fisher equation r = i – ".

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.7P

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