Show that people would deposit anything in a bank

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Question: Assume that the agent does not have the opportunity to invest, but may store part or all endowment of period 1, denoted as S1 (</ y1), for period 2 ([delta]y2=tS1, where t</1). Show graphicaly that the agent would never choose to store anything at all, if a perfect financial market exist with a positive interest rate.

Use the analysis and graph in your answer to the question above, show that people would deposit anything in a bank if the bank deposit interest rate < 0. Assume that cash can be safely stored at home.

Reference no: EM132192714

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