Question: Suppose that the nominal interest rate is zero, that is, R = 0. (a) What is the equilibrium quantity of credit card balances? (b) In

Suppose that the nominal interest rate is zero, that is, R = 0.

(a) What is the equilibrium quantity of credit card balances?

(b) In what sense does the economy run more efficiently with R = 0 than with R > 0?

(c) Explain your results in parts (a) and (b). Discuss the realism of these predictions.

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