The amount of income that households keep after paying taxes is

Assume that initially, the risk premium, ? = 0 and that the domestic and foreign interest rates are given by R = .06, R* = .05

Suppose that the risk premium depends linearly on the difference between domestic government debt, B, and domestic assets of the central bank, A, i.e., ? = Find the new domestic interest rate if a sterilized purchase of foreign assets adjusts A s.t. (a) B - A = -.01/ (b) B - A = .01/ (c) B - A = .03/

Refer to Figure 9.7. Because of the policy, consumer surplus fell by

A) $10. B) $20. C) $12,500. D) $25,000. E) $45,000.