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Essay

The US rate cuts.

Essay specific features

 

Issue:

Business

 

Written by:

Bonnie J

 

Date added:

September 2, 2013

 

Level:

University

 

Grade:

B

 

No of pages / words:

3 / 604

 

Was viewed:

8193 times

 

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Essay content:

This is the beginning of the Transmission Mechanism. As you increase the money supply the money balance gets increase, this is crucial because this drives up the Aggregate Demand. And when AD is increase, the Price levels increase due to the fact that people have afford to pay more for the some product...
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But as the price level increases the rate of interest can increase leading to less investments and a decrease in National Income which is proportional to employment. As we can see in the graph to the left a rise in Money SS (Mss) from Mss to Mss1 leads to the fall of the rate of interest. This can be connected to the DD graph for Investments, to the right of the Money SS graph...
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