the limiting value of ∂∏ explicitly as rD → rE, which becomes
1. r rD rD 1 R 3R - √R2 - 8crE 1 2R
rD→mE VD rE + q √R2 - 8crD ) = 4 rE √R2 - 8crE > 4 rE √R2 - 8crE
>0
Therefore, k > 0 even for the case where there is an excess demand for credit. □
34
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