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Shadow Prices Are Associated with Nonbinding Constraints,and Show the Change

question 63

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Shadow prices are associated with nonbinding constraints,and show the change in the optimal objective function value when the right side of the constraint equation changes by one unit.


Definitions:

Price Level

A measure of the average prices of goods and services in an economy at a given time, often compared over different periods to assess inflation or deflation.

Total Reserves

The total amount of funds or assets that a bank or financial institution has set aside to meet unexpected liabilities, requirements, or future obligations.

Vault Cash

Physical money, including coins and paper currency, that banks and other financial institutions hold in their vaults as part of their reserves.

Reserve Deposits

Reserve Deposits are funds that commercial banks hold in reserve, either in their vaults or deposited with a central bank, to meet regulatory requirements and ensure liquidity.

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