When a company must consider taxes in determining investment, its desired capital stock is chosen such that
a. MPK(f) = uc/(1-t)
b. t × MPK(f) = uc
c. MPK(f) = t × uc
d. MPK(f) = uc(1-t)
Answer: A
FIN 201
- Whether real seignorage revenue increases when the rate of money growth increases depends on whether
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- Real money demand in the economy is given by L = 0.5Y - 2500i, where Y is real income and i is the nominal interest rate. In equilibrium, real money demand L equals real money supply M/P. Suppose that Y equals 1000 and the real interest rate is 0.02. At what rate of inflation is seignorage maximized?
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