Consider an OLG economy where each generation has 20 bananas when young, and 12 bananas when old. Suppose central bank prints out 2 unit of money, give to gen 0 for free. Solve for equilibrium exchange rate “1 money = ??? bananas

Consider an OLG economy where each generation has 20 bananas when young, and 12 bananas when old. Suppose central bank prints out 2 unit of money, give to gen 0 for free. Solve for equilibrium exchange rate “1 money = ??? bananas

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter19: The International Monetary System: Order Or Disorder

Section: Chapter Questions

Problem 1DQ

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Consider an OLG economy where each generation has 20 bananas when young, and 12 bananas when old.
Suppose central bank prints out 2 unit of money, give to gen 0 for free. Solve for equilibrium exchange rate “1 money = ??? bananas”.

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