Capital goods costs phi units of the consumption good

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Suppose the intermediation or capital goods costs phi units of the consumption good for each unit of capital intermediated (phi < X^0.5). Assume that transaction costs occur when agents withdraw from hanks (when they are middle-aged). What will the equilibrium rate of return offered by intermediaries be if they are the ones who bear the transaction costs? For what value of phi. X, z, and n will flat money be valued in this economy?

Reference no: EM131099014

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