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a) If Bank A intends to maximize the profit, will it reduce its lending rates? Brieflyr explain. {5 marks] b) If Bank B intends to
a) If Bank A intends to maximize the profit, will it reduce its lending rates? Brieflyr explain. {5 marks] b) If Bank B intends to maximize the prot, will Bank B reduce its lending rates? Brieyr explain. (3 marks} C) Is there a Nash equilibrium to this rate reduction practice? If yes, what is it? (5 marks) The following question worth 25 marks, please answer all of them. If needed, please use APA referencing style. There is no word limit, but it is necessary that you provide answers with explanations. Bank B Reduce Do not reduce Bank A earns $200 Bank A earns $400 Reduce million prot Million prot Bank A Bank B earns $150 million profit Bank A earns $300 million prot Bank B earns $200 million profit Bank A earns $100 Do not reduce Million prot Bank B earns $300 million profit Bank B earns $350 million profit
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