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2. Suppose we take the basic model we saw in class (or the model in question 1) but modify the production function such that real
2. Suppose we take the basic model we saw in class (or the model in question 1) but modify the production function such that real money balances is also an input into production. The production function becomes ye = s(kx, m). If you incorporate this change, will money be superneutral in this model? Explain why or why not. I want an intuition about why money may or may not remain superneutral. You do not need to derive the FOCs again or any other conditions) (5 marks 2. Suppose we take the basic model we saw in class (or the model in question 1) but modify the production function such that real money balances is also an input into production. The production function becomes ye = s(kx, m). If you incorporate this change, will money be superneutral in this model? Explain why or why not. I want an intuition about why money may or may not remain superneutral. You do not need to derive the FOCs again or any other conditions) (5 marks
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