If a Firm Is Going to Take a Loan with a Bank

question 88

Essay

If a firm is going to take a loan with a bank that has a compensating balance requirement,how does that affect the amount of money the firm must borrow?

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Definitions:

Money Supply

The total amount of monetary assets available in an economy at a specific time.

Price Level

A composite measure reflecting the prices of all goods and services in the economy relative to prices in a base year.

Consumer Spending

The total expenditure by households on goods and services within a certain period of time, a primary engine of economic activity.

Flow Variable

A flow variable is an economic measure that represents a movement or quantity that is reported per unit of time, such as income per year or spending per month.