Sargent and Kotlikoff Essay

2697 Words Oct 23rd, 2014 11 Pages
What is a dynamic game?
In simple word, a dynamic game is where every player gives their best effort to win the game, upon the condition that they follow certain rules and regulations. Although it sounds like in a dynamic game no one knows which team will win, people will see that some of the players missed a few opportunities to score. The main problem with that is when one is inside the game as a player, he or she does not have the outside view and I think having that outside view is very important in real terms, which we call strategy, planning, wisdom, or experience. Therefore, a dynamic game is where each player, both individually and as a team, uses planned strategies and plays with their best efforts to win the game. If we use
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For example, if Federal Reserve buys 5 million dollars worth of Treasury bills, and the bank is supposed to have 10% reserve as margin, the expansion of the deposit can expanded to 50 billion in and around the banking network system. In reality, the treasury just printed new money; the public does not have the access to the new money, and only the treasury has it to spend. It is always dependent on the condition of the economy, whether spending like the above is inflationary or expansionary. If the employment rate is close to natural number, such 6% to 7%, then the above spending would create higher inflation and thus it is inflationary.
What are the consequences if the monetary authority does not coordinate with fiscal policy agents? Overall, the country will go bankrupt. It is like monetary authority will keep printing money, not knowing how much money they need. On the other hand, the fiscal agents keep spending not knowing how much they have. One of the good examples would be Greece in the last few years. The country has borrowed heavily to meet the welfare and retirement expenditures, and it came to a point where they could not afford to pay the payment on that loan, so the European Union got into the situation and loaned them more money to get them out of the problem but most of their retirement and welfare benefits has been eliminated as a result. That is exactly what happens when the head does not watch the tail.
Has Sargent done of good job

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