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4

Let $A_t$ be the amount of money at the beginning of year $t$ and let $r$ be the interest rate. Assume that each year, we invest an additional amount of $Q$ Then we can recursively write this as: $$A_t = (1+r)A_{t-1} + Q.$$ So the amount at time $t$, $A_t$ is the amount last year $A_t$ plus a percentage $r$ of $A_t$ plus $Q$. We would like to find a closed ...

1

Because of exchange rate and uncovered interest rate parity (UIP). By the UIP the following relationship should hold between nominal interest rates and exchange rates: $$(1+i_{t}^) = \frac{E_t(S_{t+1})}{S_t}(1+i_{t}^€)$$ In short, the ratio of expected future nominal exchange rate ($E_t(S_{t+1})$) and current nominal exchange rate ($S_t$) should make the ...

2

Could the Feds objectives be adjusted to decrease or at least not increase wealth inequality? Trivially, answer is yes. Congress could just give Fed a mandate for lowering inequality, the same way as congress could pass a law giving Fed mandate to bring world peace or solve world hunger or conduct space exploration. US is sovereign state and Fed is ...

0

Banks lend because it is profitable for them to lend out money. Banks do become less profitable in low interest environment, but they are still empirically able to maintain profitability, although there is evidence that goes hand in hand with some increase in risk taking (e.g. see Bikker & Vervliet 2018). Consequently, the direct answer to your question ...

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