Question

o discovered that rate-of-return differences provi elopment of financial intermediaries. These intermeutaries provige We have also ive or tis correcting the mismatch of maturities between liquid money andilliquied ervice w funneling saving to investment in capital, the presence of intermediaries higher output in an economy eads t0 ider another role for banks. Banks may serve as monitors of risky ven- capital. By tures. Banks than people offer lower risk through diversification and lower monitoring costs could find by lending on their own. 6 Exercises .I. Consider our model of three-period-lived individuals of this chapter. Suppose the two- period real rate of return on capital is X 1.44, the rate of population growth is n L.1, and the rate of fiat money creation is z 1.2. Find the following net rate for both one and two periods: a. nominal rate of interest, b. real rate of interest, c. rate of inflation, and d. real rate of return on money 82. Suppose the intermediation of capital goods costs ф units of the consumption good for each unit of capital intermediated (ф < X0.5). Assume that transaction costs occur when agents withdraw from banks (when they are middle-aged). What will the equi- librium rate of return offered by intermediaries be if they are the ones who bear the transaction costs? For what value of ф, X, z, and n will fiat money be valued in this economy? 8.3, Cons ider an economy in which people live two-period lives in overlapping generations but are endowed only in the first period of life. Capital has a minimum size, k,which is greater than the endowment of any single individual but less than the total endowment a single generation. Capital pays a one-period gross real rate of return equal to a grows 10 percent in each period. There exists a constant nominal stock The population of fiat money owned by the initial old.

Hi, I need things questions answered but specifically 8.2!

Suppose the intermediation of capital goods costs (phi) units of the consumption good for each unit of capital intermediate. Assume that transaction costs occur when agents withdraw from banks (when they are middle-aged). What will the equilibrium rate offered by intermediaries be if they are the ones who bear transaction costs?

Answer 1

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