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a. Determine the optimal strategy for cash management for the person who earns $1600 per month, can earn 0.5 percent interest per month in a

a. Determine the optimal strategy for cash management for the person who earns $1600 per month, can earn 0.5 percent interest per month in a saving account, and has a transaction cost of $1.

b. What is the individuals average money holding?

c. Suppose income rises to $1800. By what percentage does the persons

demand for money rise?

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