Q1. Consider a simple economy with a constant number of young people born each period N and a constant stock of nominal money M. Each young person born at time t has W1, t units of the consumption good that they produce, and they produce nothing when old. Production grows over time: W1, t= (1 + 9) W1, t-1 q>0 Suppose young households desire to save a constant fraction 1 - of their income (just as in the basic Solow model), so that real money balances are vt mt+1 = (1 - B) W1, t a. Write down equations that represent the budget constraints for young and old households. Combine these constraints into a single budget constraint and graph the consumption- savings decision of the household. b. Write down the condition that sets supply equal to demand in the money market. Find the real rate of return on money and the inflation rate. What is happening to the price level over time? Q1. Consider a simple economy with a constant number of young people born each period N and a constant stock of nominal money M. Each young person born at time t has W1, t units of the consumption good that they produce, and they produce nothing when old. Production grows over time: W1, t= (1 + 9) W1, t-1 q>0 Suppose young households desire to save a constant fraction 1 - of their income (just as in the basic Solow model), so that real money balances are vt mt+1 = (1 - B) W1, t a. Write down equations that represent the budget constraints for young and old households. Combine these constraints into a single budget constraint and graph the consumption- savings decision of the household. b. Write down the condition that sets supply equal to demand in the money market. Find the real rate of return on money and the inflation rate. What is happening to the price level over time