Substitution effect of a wage increase

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Reference no: EM138311

Q. Q1. Explain how a tight monetary policy could affect the amount of funds borrowed at financial institutions by deficit units such as ABC Company. Explain how might it affect the credit risk of these deficit units? Explain how might it affect the performance of financial institutions that provide credit to such deficit units as ABC Company?

Q2. Describe the differences between the substitution effect of a wage increase and the income effect of a wage increase

Q3. What are the risks and potential problems using the monetary policy?

Reference no: EM138311

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