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Please answer this question regarding to the tobin model. All of the information has been provided. Thanks! = QUESTION: On the Tobin graphs, show the

Please answer this question regarding to the tobin model. All of the information has been provided. Thanks!

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= QUESTION: On the Tobin graphs, show the optimal change in a (the portfolio weight on bonds) that would arise from a decrease in money risk, everything else constant. Assume, im O and that Om is always less than the ob. You must start from a situation where om > 0, and assume a 50/50 portfolio to begin. The first stage in the problem is getting the slope changes right in both diagrams and examining how WE and SE affect the choice of the new a. The market effects enter in the second stage. After providing the diagram, please answer the following 3 questions: a. Given =B/(M+B), explicitly show the direction of change in a derived from SE and WE. b. In the market stage, explain how and why the risk premium on bonds changes. c. Thinking of the problem in terms of the three-sector bond and money market shifts, what should happen to the price of goods P? Can you show this through the equation underlying the money market? = QUESTION: On the Tobin graphs, show the optimal change in a (the portfolio weight on bonds) that would arise from a decrease in money risk, everything else constant. Assume, im O and that Om is always less than the ob. You must start from a situation where om > 0, and assume a 50/50 portfolio to begin. The first stage in the problem is getting the slope changes right in both diagrams and examining how WE and SE affect the choice of the new a. The market effects enter in the second stage. After providing the diagram, please answer the following 3 questions: a. Given =B/(M+B), explicitly show the direction of change in a derived from SE and WE. b. In the market stage, explain how and why the risk premium on bonds changes. c. Thinking of the problem in terms of the three-sector bond and money market shifts, what should happen to the price of goods P? Can you show this through the equation underlying the money market

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