Monetaryamp;Financial Macro 2011 Homework 1 The due date for this Homework is Thursday February 10 (group 70), Friday February 11 (group 68). Solve...

2. Suppose the consumption of gold o¤ers people a marginal utility that diminishes as thatperson consumes more gold. Assume also that gold can be mined in unlimited amounts atthe constant marginal cost, , units of the non-gold consumption good.a. Can the trading value of gold exceed in equilibrium? Explain. What is the e¤ect ongold consumption and mining of an increased use of gold as money?b. Suppose instead that the marginal mining cost increases with the amount mined. Whatis now the e¤ect on gold consumption and mining of an increased use of gold as money?