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Question is attached as an image. Consider an economy where n = 1.1 and Y1- =1.25yt_1 [an economy where both population and endowment are growing.
Question is attached as an image.
Consider an economy where n = 1.1 and Y1- =1.25yt_1 [an economy where both population and endowment are growing. Assume old people do not reoeive any endowments. Assume that a young person's preferences are such that they want to consume twothirds of their endowment such that '31,: = 0-5519}- AHUME STATTONARV EQUILIBRIUM. SHOW 'WJUR STEPS. Given the data above: i. Derive the Lifetime Budget Constraint (LBCJI in the context of a monetary equilibrium where young individuals save money for old age consumption. ii. Use the money market equilibrium to solve for real rate of return for money. Assume the initial old is endowed with 1000 units of fiat money. (Note: money is not growing in this economy] iii. Derive the Feasible Set [F5] for the above economy using the provided data. iv. Use the equilibrium real rate of return for money in the LBC to compare the same with the Feasible Set. Explain whether Golden Rule can be achieved through decentralized decision making? v. Based on your answers for part iv, do you think i. population growth, ii. growth in endowment and iii. amount of fiat money supplied will create any difference between decentralized decision making and central planner's solution? Explain yourStep by Step Solution
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