This problem set continues Problem set 11 . Consider a money search model. Time is discrete and infinite. There is a continuum of infinitely-lived agents with unit mass. Assume there are N types of agents and N goods, where type n agents consume good n but produce good n+1 modulo N (i.e., type N agents produce good N+1=1 ). The fraction of type n is 1/N for n=1,2,N. Agents meet bilaterally in each period with probability 1. Each agent has preferences given by E0t=0(1+r1)tu(ct), where r>0,ct is consumption and u() is a strictly increasing function. A fraction M of the population is endowed with one unit of fiat money in period 0 . Goods and money are indivisible. An agent can store at most one unit of any good (including money) at zero cost. Assume free disposal. Let u=u(1) and normalize u(0) to 0 . 1. If there are multiple equilibria, can these be Pareto-ranked? Explain. 2. Derive the optimal quantity of money that maximizes the ex-ante expected utility of the agents. This problem set continues Problem set 11 . Consider a money search model. Time is discrete and infinite. There is a continuum of infinitely-lived agents with unit mass. Assume there are N types of agents and N goods, where type n agents consume good n but produce good n+1 modulo N (i.e., type N agents produce good N+1=1 ). The fraction of type n is 1/N for n=1,2,N. Agents meet bilaterally in each period with probability 1. Each agent has preferences given by E0t=0(1+r1)tu(ct), where r>0,ct is consumption and u() is a strictly increasing function. A fraction M of the population is endowed with one unit of fiat money in period 0 . Goods and money are indivisible. An agent can store at most one unit of any good (including money) at zero cost. Assume free disposal. Let u=u(1) and normalize u(0) to 0 . 1. If there are multiple equilibria, can these be Pareto-ranked? Explain. 2. Derive the optimal quantity of money that maximizes the ex-ante expected utility of the agents