n the example with credit market imperfections in general equilibrium Question 11 options: all consumers are identical. lenders consumer only in the current period and borrowers consumer only in the future period. lenders consume only in the future period and borrowers consume only in the current period. borrowers face a higher market interest rate than does the government. the government never borrows.
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Lenders are individuals who have excess funds that they are willing to lend out, while borrowers are individuals who need to borrow funds to finance their consumption or investment. Show more…
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Considering an one-period general equilibrium model similar to Example in Lecture 08, slide 11 and 12. Also the Experiment 2 from Lecture 07, slide 13 is also a good reference. However, in this model economy, there are two differences: 1. firm rent capital from consumer, and consumers are endowed with 2 units of capital (Ks = 2). 2. consumer's utility function is U(C, l) = C^(1-b)/(1-b) + l^(1-d)/(1-d) The competitive equilibrium given {G, z, ______} is a set of allocations {Y*, C*, l*, Ns, Nd, π*, T*, ______} and prices {w*, ______} such that 1. Taken prices and π, T as given, the representative consumer solves
Akash M.
What effects do credit market imperfections have on the interest rates faced by lenders and borrowers? (Select all that apply.) A. Interest rates at which consumers and firms can lend are lower than the interest rate at which they can borrow. B. Interest rates at which consumers and firms can lend are higher than the interest rate at which they can borrow. C. Interest rates at which consumers and firms can lend are the same as the interest rate at which they can borrow. D. Consumers and firms can borrow up to the quantity they would like at market interest rates. E. Lenders are sometimes required to post collateral against a loan. F. Borrowers are sometimes required to post collateral against a loan. G. Consumers and firms cannot borrow up to the quantity they would like at market interest rates.
Jennifer S.
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