Consider the OLG model that we develop in class. There are N people in every generation. Each individual is endowed with y units of goods when young and nothing when old. Suppose that monetary authority prints fiat money at the rate z but now does not distribute the newly printed money as a lump-sum transfer to the old. Instead, the government distributes the newly printed money by giving each old individual new dollars for each dollar acquired when young.

Graph the stationary monetary equilibrium. Carefully label the axes and the optimal allocation