Capital goods costs f units of the consumption good

Reference no: EM13691238

Suppose the intermediation of capital goods costs φ units of the consumption good for each unit of capital intermediated (φ<X0.5). Assume that transaction costs occur when agents withdraw from banks (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 φ, X, z, and n will fiat money be valued in this economy?

Reference no: EM13691238

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