a. In what sense in capital illiquid in this economy? Is fiat money subject to this same liquidity problem? b. Describe an intermediary that might overcome the illiquidity of capital so that intermediated capital may be used to acquire consumption in the second period of life. c. Suppose there is only one person in each generation who is able to run an intermediary. What is the minimum rate of return that person must offer to attract the depositors? For what values of x can this individual make a profit? d. What rate of return will be offered on deposits if many people in each generation able to run an intermediary?

a. In what sense in capital illiquid in this economy? Is fiat money subject to this same liquidity problem? b. Describe an intermediary that might overcome the illiquidity of capital so that intermediated capital may be used to acquire consumption in the second period of life. c. Suppose there is only one person in each generation who is able to run an intermediary. What is the minimum rate of return that person must offer to attract the depositors? For what values of x can this individual make a profit? d. What rate of return will be offered on deposits if many people in each generation able to run an intermediary?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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