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Consider Chapter 6 model. The money growth rate is a random variable. Let the probability be 4/5 that z t = 1 and the probability

Consider Chapter 6 model. The money growth rate is a random variable. Let the probability be 4/5 that z_t = 1 and the probability be 1/5 that z_t = 2. The realized value of z_t is kept secret until all purchases have occurred - that is, people do not learn M_t until period t is over. Prices are only thing directly observable by the young. Let

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