ECON 702 Midterm: prelim_702_JFV_2015
Document Summary
Consider an economy consisting of overlapping generations of two-period lived agents. There is a constant population of n young agents born at each date t (cid:21) 1. There is a single consumption good that is not storable. Each agent born in t (cid:21) 1 is endowed with w1 units of the consumption good when young and with w2 units when old, where 0 < w2 < w1. In addition, at time 1, there are alive n old people who are endowed with a total of h0 units of (cid:133)at money and who want to maximize their consumption of the time-1 good. A government attempts to (cid:133)nance a constant level of government purchases gt = g > 0 for t (cid:21) 1 by printing new money. G does not yield any utility to private agents. 1 + r(t) = 1 + r1; then there exists at least one other stationary equilibrium with valued money with.
