Using the appropriate diagram, show the impact of the case where credit markets are imperfect and intermediaries (like banks) make a positive profit

Using the appropriate diagram, show the impact of the case where credit markets are imperfect

and intermediaries (like banks) make a positive profit from intermediation, so that there is a

wedge between the interest rate charged by lenders and that earned by savers. What is the

effect of this wedge on the optimal choice of a household that had previously been a saver?

Leave a Reply