April 27, 2003

Sunday's Review

Even if an MBA is worth an extra $10,000 per year, it is not a good investment if you discount at 10%. If you assume that your income will go up at 2% less than the interest rate, however, an MBA is a good investment.


All the possibilities:






Notice that you can hold X, buy the put, and sell the call with no risk. This would be good if you want to vote for the board of directors or hold your stock in the family business without risk.

Q: How does the velocity discussion enter the IS/LM Model?

A: The accounting identity MV = PY becomes MV(R) = PY or M = PY/V(R). This is the basis for the demand for money, which the IS/LM Model shows as a downward sloping function of the interest rate.

Posted by bparke at April 27, 2003 04:14 PM