Thorough explanation

2. An economy has two dates f = 0, 1, with trading in assets (only) at date 0, and spot trading in commodities at { = 1 after the state of the world becomes known to all agents. (So we are back to the model studied in class). There are L physical commodities, S states s = 1. ....S, with household i having endowments wis, belief *;s and strictly monotone utility function wis(r;,) in state s. There are K assets, where asset & generates a return sk of commodity 1 in state s. Now suppose a new 'mutual fund' (K + 1) th asset is created, combining the K assets described above in given proportions a1, ..., ox, so that a single unit of the new asset yields return ".Khairat ... tokrsk. (a) Express the Radner equilibrium price of the new asset as a function of the Radner equilibrium prices q of the primary assets k = 1, ..., K.1. Use the following version of the IS-LM model to answer all parts of this question. Endogenous Exogenous Consumption: C = 200 + .8*Yd Variables Variables Dispoable Income: Yd = Y - T Taxes T = 125 +.25*Y C, Yd, T, Y M, G, P, Yf Investment I = 200 - 20*r AD, I, r, NX (foreignY) Net Exports NX = 100 - .2*Y - 5*r+ .1Yf Md Aggregate Demand AD = C+I+ G + NX Goods Market Equilibrium Y = AD Money Demand Md = (.5Y - 50*r)*P Money Market Equilibrium Md = M Assume Y