# Question: Suppose that the nominal interest rate is zero that is

Suppose that the nominal interest rate is zero, that is, R = 0.

(a) What is the equilibrium quantity of credit card balances?

(b) In what sense does the economy run more efficiently with R = 0 than with R > 0?

(c) Explain your results in parts (a) and (b). Discuss the realism of these predictions.

(a) What is the equilibrium quantity of credit card balances?

(b) In what sense does the economy run more efficiently with R = 0 than with R > 0?

(c) Explain your results in parts (a) and (b). Discuss the realism of these predictions.

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