Each young is endowed with y=20 goods and middle-aged and old are not endowed. Young people would like to consumer half of their endowment when young and the rest either when middle-aged or old. Assume that 20% of the young want to consume half of their endowment when middle-aged and 80% of the young want to consumer when old. There is a bank that offers two saving options: storage and capital technology. With storage technology, for each good stored, a person receives one good next period. With capital technology, for each good invested, a person receives 1.4 goods in two-periods or only 0.9 goods in one period. Refer to Scenario 1. If there was no bank run, how many goods will each middle-aged consume?

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20 of young people will consume 5 goods when middle aged ... View the full answer