Question: (a) (10 points) What will be the minimum level of C so that people (or banks) will start choosing the risky illiquid asset instead of

(a) (10 points) What will be the minimum level of C

(a) (10 points) What will be the minimum level of C so that people (or banks) will start choosing the risky illiquid asset instead of the riskwfree illiquid asset? (b) (10 points) Write down the resource constraint for this bank run model. (c) (10 points] Formulate the maximization equation and solve for the most eicient solutions for consumption of both types of agents. ((1) (10 points) From part (c), can you conclude that 1 4

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