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Consider an economy in which people live two-period lives in overlapping generations but are endowed only in the first period of life. Capital has a minimum size, k^*, which is greater than the endowment of any single individual but less than the total endowment of a single generation. Capital pays a one-period gross real rate of return equal to x. The population grows 10 percent in each period. There exists a constant nominal stock of fiat money owned by the initial old. a. In what sense is cap
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