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This is a question from Chapter 2 Appendix section. Suppose in an economy utility function is given by: In(C1) + b In (C2,011) where, b
This is a question from Chapter 2 Appendix section. Suppose in an economy utility function is given by: In(C1) + b In (C2,011) where, b is a positive parameter. Given the young person's real demand for money is vim = 97 (a) Prove that real money balances is given by:q+=by/[1 + b). SHOW YOUR STEPS. (b) Derive expressions for the lifetime consumption pattern: Ct and c2t+1. SHOW YOUR STEPS. (c)What effects does an increase in b have on real money balances and the lifetime consumption pattern? Give an intuitive interpretation of the parameter b
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