Transaction CostsTransaction costs, the time and money spent in carrying out financial transactions, are a major problem for people who have excess funds to lend. As we have seen, Carl the carpenter needs $1,000 for his new tool, and you know that it is an excellent investment opportunity. You have the cash and would like to lend him the money, but to protect your investment, you have to hire a lawyer to write up the loan con- tract that specifies how much interest Carl will pay you, when he will make these interest payments, and when he will repay you the $1,000
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