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Suppose that in this economy all the funds for capital come from savings by the 10 individuals. Firms' demand for capital is given byQ D=100100r.
Suppose that in this economy all the funds for capital come from savings by the 10 individuals. Firms' demand for capital is given byQ
D=100100r.
What is the market supply for funds if the interest rate is 30%? Qs=
What is the market supply for funds if the interest rate is 70%? Qs=
What is the equilibrium interest rate that clears the capital market? r=
What is aggregate consumption in each period at that interest rate? C1 and C2
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