In a random relocation economy, each person receives an endowment of 100 goods when young. Everyone wants to consume when old. Assume x=1.1

a) What would a non-mover consume in this economy when old?

b) If full risk sharing is achieved what is the rate of change of money supply (z) in this economy?

Consider a three-period model economy in which capital pays a rate X after two periods. People are endowed with y goods when young and nothing when middle aged and old. Assume population grows at rate n in each period. Intermediation is costless but observable by the government, but capital creation is not observable by the government.

a) Can the government earn revenue from seigniorage and bonds in this economy? Explain.

b) If the government is able to roll over the debt, what should be the value of X?