EconomicsScenario 1Consider an overlapping generations model with 100 lenders and 121 borrowers born in every period. Everyonelives for only two periods. Each lender is endowed with 20 goods when young and nothing when old. Eachborrower is endowed with nothing when young and 10 goods when old. Let r be the gross real interest rate onprivate loans. Also, assume there is na fat money or capital. Let cu be the consumtion in period i-1.2 forlenders and ca be the consumption in the period i-1,2 for the borrowers. Also, let I be amount of goods lentand let b the amount of goods borrowed.Refer to Scenario 1. Suppose lenders want to save 10r each and borrowers want to borrow 100/r each. At themarket clearing r, what is the total amount lent and borrowed?O 10900O 1100O 1000

We are going to calculate market clearing interest rate to answer this question.

Scenario 1 Consider an overlapping generations model with 100 lenders and 121 borrowers born in every period. Everyone lives for only two periods. Each lender is endowed with 20 goods when young and nothing when old. Each borrower is endowed with nothing when young and 10 goods when old. Let r be the gross real interest rate on private loans. Also, assume there is no fat money or capital. Let cu be the consumtion in period i-1,2 for lenders and ca be the consumption in the period i-1,2 for the borrowers. Also, let / be amount of goods lent and let b the amount of goods borrowed. Refer to Scenario 1. Suppose lenders want to save 10r each and borrowers want to borrow 10/r each. At the market clearingr, what is the total amount lent and borrowed? O 10 900 O 1100 O 1000

Scenario 1 Consider an overlapping generations model with 100 lenders and 121 borrowers born in every period. Everyone lives for only two periods. Each lender is endowed with 20 goods when young and nothing when old. Each borrower is endowed with nothing when young and 10 goods when old. Let r be the gross real interest rate on private loans. Also, assume there is no fat money or capital. Let cu be the consumtion in period i-1,2 for lenders and ca be the consumption in the period i-1,2 for the borrowers. Also, let / be amount of goods lent and let b the amount of goods borrowed. Refer to Scenario 1. Suppose lenders want to save 10r each and borrowers want to borrow 10/r each. At the market clearingr, what is the total amount lent and borrowed? O 10 900 O 1100 O 1000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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