Money, Banking and Financial Markets:

Consider an economy with a shrinking stock of fiat money.Let N_t=N, a constant, and Mt =zM_(t-1) for every period t, where z is positive and less than 1.The government taxes each old person ?goods in each period, payable in fiat money.It destroys the money it collects.

a. Find and explain the rate of return in a monetary equilibrium.

b. Prove that the monetary equilibrium does not maximize the utility of the future generations.Hint: Follow the steps of the equilibrium with a subsidy, noting that a tax is like a negative subsidy.

c. Do the initial old prefer this policy to the policy that maintains a constant stock of fiat money?Explain.

Could you plz give me clear answer step by step and some explanations, thanks and best wishes;)

ponsider an economy with a shn'nking stock of at money. Let N: = N , a constant, and 'IM; = zM,_; for every period I, where z is positive and less than 1. The government taxes each old person 1: goods in each period, payable in at money. It destroys the money it collects. a. Find and explain the rate of return in a monetary equilibrium. b. Prove that the monetary equilibrium does not maximize the utility of the future generations. Hint: Follow the steps of the equilibrium with a subsidy, noting that a tax is like a negative subsidy. c. Do the initial old prefer this policy to the policy that maintains a constant stock of at money? Explain