# solution

Consider an OLG economy where each generation has 20 bananas when young, and 0 bananas when old.

(a) What is cy and co for each generation without money? How happy is each generation?

(b) Suppose central bank prints out 2 unit of money, give to gen 0 for free. Solve for equilibrium exchange rate â€œ1 money = v bananasâ€.

(c) What is the cy and co for each generation with money? How happy is each generation?

B) Consider an OLG economy where each generation has 20 bananas when young, and 12 bananas when old.

(a) What is cy and co for each generation without money? How happy is each generation?

(b) Suppose central bank prints out 2 unit of money, give to gen 0 for free. Solve for equilibrium exchange rate â€œ1 money = v bananasâ€.

(c) What is the cy and co for each generation with money? How happy is each generation?

C) Consider an OLG economy where each generation has 50 bananas when young, and 10 bananas when old.

(a) What is cy and co for each generation without money? How happy is each generation?

(b) Suppose central bank prints out 4 unit of money, give to gen 0 for free. Solve for equilibrium exchange rate â€œ1 money = v bananasâ€.

(c) What is the cy and co for each generation with money? How happy is each generation?