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Simplifying Assumption Regarding the Bank Owner's Consumption in the Marco-Julia Model
To maintain focus on the core interaction, the Marco-Julia model makes a simplifying assumption about the bank owner's personal finances. It is presumed that the owner participates in other economic activities, such as lending and borrowing with different households, which generate the income needed for their consumption across both periods.
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Ch.6 The financial sector: Debt, money, and financial markets - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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Simplified Nature of the Bank in the Marco-Julia Model
Simplifying Assumption Regarding the Bank Owner's Consumption in the Marco-Julia Model
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In a simple economic model, an individual with an initial endowment of a good can lend directly to an individual with no endowment. If a bank is introduced to act as an intermediary, where the first individual deposits the good and the bank then lends it to the second individual, how does the nature of the financial claim held by the original lender change?
Risk Allocation in an Intermediated Economy