Consider the economy in chapter 10. You are given an economy with 500 workers born each

period. Income is received and young and nothing when old. There are 200 young workers whose

income is equal to 2,000 units of the consumption good. For the remaining 300 workers, each

receives income equal to 500 units of the consumption good when young. High-income workers

save 1,000 units of the consumption good when young. Low-income workers save 100 units of

the consumption good when young. Let the gross real return on capital be 1.5. The money supply

is constant. The young worker can either deposit goods into a bank, or acquire fiat money to

purchase consumption goods when old. If the young person deposits goods in the bank, it costs

20 units of the consumption good to withdraw.

a. What is the gross real return on money?

b. Compute the gross return to deposits be for the high-income worker if they deposited

savings into the bank.

c. Compute the gross return to deposits for the low-income worker if they deposited savings

into the bank.

d. Based on your answers to parts b) and c), compute the aggregate quantity of capital

acquired by the bank on behalf of all the depositors.

e. Compute aggregate GDP in this economy.