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Consider the following OLG economy with N individuals in each gen- eration. Individuals are endowed with y units of the consumption good when young and
Consider the following OLG economy with N individuals in each gen-
eration. Individuals are endowed with y units of the consumption good when young and
nothing when old. Fiat money is supplied by the government. The initial old are endowed
with M0 units of money. The growth rate of the money supply is z where Mt = zMt-1 and
z > 1. Newly printed money is used to finance government spending. Preferences are such
that individuals would like to consume in both periods of life and young individuals also
value government spending.
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