Suppose that consumers can meet and trade in period 1 instead of going to the bank in
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Suppose that consumers can meet and trade in period 1 instead of going to the bank in sequence. Show that, given the banking contract (d1, d2),there could be Pareto-improving trades that early and late consumers could make in period 1 that would undo the banking contract, so that this would not constitute an equilibrium. Discuss your results.
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Thus we can say that the Solow model is more advanced and realistic than HarrodDomar mode...View the full answer
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Dudhat Vaidehi
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