Textbook Notes (369,137)
Canada (162,407)
Economics (708)


4 Pages

Course Code
Economics 2152A/B
Jennifer Mori

This preview shows page 1. Sign up to view the full 4 pages of the document.
Chapter 10Pages317324 Credit Market ImperfectionsRecall the consumers budget constraintcc1r yy1r tt1rRecall further that if Ricardian equivalence holds then the timing of taxes will not matter for present consumption Suppose that the consumer is credit constrained That is the consumer cannot for some reason perhaps he has a bad credit rating borrow in the present period However he would borrow if he was not credit constrained We want to show what may happen if taxes were lowered in the present period in this situationTo set this up we start by considering two interest rates one for saving lending r1 and another for borrowing r2This is of course what happens in financial markets since banks and other lenders make their profit by making loans at a higher rate than they pay savers The diagram that illustrates this is reproduced belowCopyright2013 Pearson Canada Inc
More Less
Unlock Document

Only page 1 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.