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1500 questions
8
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3 answers
On the relationship between income distribution and GDP
I was thinking about the following simple example when I wondered what the theoretical effects wealth equality or inequality may have on GDP:
Suppose there is a society with three individuals who have enough money to cater for all their needs, and…
Kenshin
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Can someone explain graphically why MRS is invariant under monotonic transformation?
Let $U(x,y)$ be a utility function. Suppose I have an indifference curve for which $U(x,y) = \bar{U}$. Then $dU = 0$ along the curve and I can rearrange to find the MRS.
Suppose I have a monotonic transformation of my utility function. That is,…
Stan Shunpike
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8
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1 answer
Restricting "money creation" to the central bank
Iceland is considering removing "money creation" from commercial banks.
[Despite the date of the article, I don't think this is a joke, as it has been picked up in other places since without anyone claiming it was a joke.]
I guess that what they…
GS - Apologise to Monica
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8
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8 answers
Are there examples of state banks in history?
Today most banking is private. Has there been any period in history where banking was (in part) state-owned and why was it privatized?
CuriousIndeed
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8
votes
2 answers
Example of an economy where Equilibria may not be efficient, where one agent is altruistic
I'm looking for a theoretic example of an economy where one agent is altruistic, while the others are not, that would make a walrasian equilibrium not efficient.
An old man in the sea.
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8
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1 answer
Preference over lotteries without independence axiom
Suppose a set of $N$ outcomes can be ranked in the following order: $1\succ 2\succsim\cdots\succsim N$. Further, suppose a decision maker has preference over lotteries over these outcomes. Assume the preference over lotteries is rational,…
Herr K.
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8
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2 answers
Currency Devaluation and the causes of the Tequila Crisis
I was reading about some of the famous crisis that happened in the past and i came across "the tequila crisis" in mexico during 1994-96.
As a background, The Tequila crisis (also known as the Mexican Peso Crisis or December mistake crisis) was a…
suhail
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8
votes
2 answers
Solving Kaplan and Menzio: Shopping Time
Kaplan and Menzio's shopping time model is a search&matching unemployment model where we, for a steady state equilibrium, need to determine to variables:
$J$: Value of a worker
$u$: unemployment rate
Their steady state values ($\dot J, \dot u =…
FooBar
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8
votes
1 answer
Muth exposition of the rational expectations hypothesis
I am reading in statistical decision theory and stumbled upon the rational expectations literature (rationality with incomplete information->dynamic problem->N.L Stokey->husband). The assumption that subjective expectation approximates the objective…
Xiaoeu
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8
votes
2 answers
Transition Matrix: Discrete -> Continuous Time
I have the code corresponding to Tauchen (1986) (Python equivalent of this), which generates a discrete approximation of a discrete time AR(1) process.
For example, if you set up grid size as 3, it gives you a vector of productivities
[A_1, A_2,…
FooBar
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8
votes
3 answers
Do governments have to pay interest on government debt held by the central bank?
Through open market operations, the central bank may buy government debt to increase the money supply. Does the government need to pay interest on the debt held by the central bank, or does the debt become interest-free?
Flux
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8
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1 answer
Is "avoiding being the bearer of bad news" an example of the "principal-agent problem"?
For example:
A king designs a bridge, and he unknowingly does a bad job. He asks an engineer for her opinion, but the engineer fears that if she tells the truth, the dictator will be angry with her.
More generally, I'm thinking of situations in…
wintergreen_plaza
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8
votes
3 answers
Intuition - Why does elasticity vary along a curve?
Source: p 96, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw
Even though the slope of a linear demand curve is constant, the elasticity is not.
This is true because the slope is the ratio of changes in the two variables, whereas
…
user4020
8
votes
1 answer
Why did the Cambridge Capital Controversy have no impact on economic modelling?
Every now and again I find myself looking into the Cambridge Capital Controversy in terms of debate around general equilibrium modelling often walking out more confused than I have before doing such a google search.
This being said given the…
EconJohn
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8
votes
1 answer
Is indefinite exponential economic growth possible?
Economic growth is frequently expressed as a % of GDP. Proponents of a steady-state economy postulate that perpetual exponential economic growth is impossible and that any system relying on it is inherently unstable. Is this true?
Is indefinite…
gerrit
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