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Why do prices and interest rate still exist in the example with a single household? Does the household trade and borrow with itself? In the model you present above it is ambiguous how goods are produced, so there is ambiguity there. You could have a model of an economy where single household owns the firm and trades with itself. However, that would normally ...


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"Price" implicitly refers to money. The price of a good is the amount of money you exchange for it. "Price" could refer to how much of good A you exchange for good B. However, then it makes no sense to talk about inflation, because the situation is symmetrical. If good B is getting more expensive measured in units of good A (inflation), ...


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Inflation by definition is a positive change in price level. You do not need to introduce money stock $M$ into a model for it to have inflation. Note prices exist independently of money. Prices are fundamentally, as Bertrand pointed out, just exchange rates of one goods or service into another. For example, a simple Philips curve is a model of inflation ...


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A brief answer: you have it a bit wrong. Thinking about Primary Dealers this way is misleading. Although PDs do buy some bonds at auction, their function is mostly to facilitate sales to the public. So think of government bond sales as sales to the public. Then you can see that government selling bonds to the public is actually a monetary contraction (...


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Repo Operations of United States Federal Reserve https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements Repos are a common secured money market transaction. In a repo transaction, the Desk purchases securities from a counterparty subject to an agreement to resell the securities at a later ...


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