Question: Problem 7.5: BaumolTobin Model. (15 points) The average money holdings in an economy are $10,000, while annual consumption expenditures are $60,000. Suppose that the consumer

Problem 7.5: BaumolTobin Model. (15 points) The average money holdings in an economy are $10,000, while annual consumption expenditures are $60,000. Suppose that the consumer behaves according to the Baumol Tobin model. (a) How often does the consumer go to the bank? (b) Suppose that the nominal interest rate is 5% and the price level is P} = 1. What is the xed cost of going to the bank that rationalizes the consumer's average money holdings? (c) How often would the consumer go to the bank and how would its average money holdings change if the interest rate were to increase to 10%

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