What Are Compensating Balance and What Effect Does It Have

question 28

Essay

What are compensating balance and what effect does it have on the loan?

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Definitions:

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Equilibrium Price

The pricing point where the volume of a good or service provided equals the volume demanded, achieving market harmony.

Market-Clearing Price

The price at which the quantity of a product offered is equal to the quantity of the product in demand, clearing the market.

Market Price

The current price at which an asset or service can be bought or sold in the open market, determined by supply and demand dynamics.