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April 27, 2015

Homework Help: economics

Posted by Kayla on Tuesday, April 10, 2007 at 5:24pm.

how can a loan for school tuition affect the money supply? how can it affect aggregate demand?

A loan, taken out of some cash reserve, would increase the money supply. The amount of the increase would be determined by the money-multiplier. The increase in spending (in this example on school tuition) is itself an increase in aggregate demand. This increase has ripple effects, aggregate spending rising by a multipler process.

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