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If the Amount of Money Demanded by Household and Firms

question 71

Essay

If the amount of money demanded by household and firms is less than the amount in circulation as determined by the Fed what will happen to the rate of interest and why?


Definitions:

Value Added

The increase in worth of a product or service as a result of a particular process, typically measured as the difference between the market price and the production cost.

Final Sales

The total value of all goods and services sold for final use, excluding intermediary transactions and unsold inventory.

Leakage

In economics, the term refers to a situation where income or resources exit an economy or system rather than being retained or reinvested.

Circular Flow

Describes the continuous movement of goods, services, and money between households and businesses in an economy, illustrating how these entities interact in the markets for resources and products.

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