term 2- lecture 2 - model to study inflation Flashcards
what are the costs of inflation?
menu costs, shoe leather costs, loss of purchasing power, redistribution of wealth
what is the framework for the model with costly inflation?
large number of identical immortal individuals. utility depends on consumption and labour, there is a perishable good produced by labor only. Y_t=L_t.
provide the framework for the financial market in the model which accounts for inflation?
households have access to two different assets : private bonds and money. bonds pay interest of 1+R_t, money pays no interest. central bank controls money in circulation where M_t is amount of money per person carried over from period t.
what is the total amount of resources in the model which includes inflation?
what is the budget constraint at date t?
what is the cash in hand constraint and why is it introduced?
what is the problem of the representative household in the model which includes inflation?
what are the first order conditions to the problem of the representative household in the model which includes inflation?
what is the equation for the money market clearance for the model which includes inflation?
what is the equation for the bond market clearance in the model which includes inflation?
what is the equation for the goods market clearance in the model which includes inflation?
what is the equilibrium value of the nominal interest rate ?
how is consumption, output and labor impacted by inflation at the steady state?
