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❶Banks will hold the money flow if the central bank sets the discount rate high on the other hand low interest rate will encourage the smooth flow of money and encourage the investments.

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Demand is usually represented by a demand schedule which highlights the quantity and price as initiated by the consumer. As explained by the law of demand, the relationship between price and quantity is inverse and is represented through a graph known as the demand curve and algebraically explained through the demand equation. A change in demand might occur due to a change in the prices of other allied goods that include the components and the substitutes.

Also, any change in the income of the buyers it will also result in a change in demand. For the normal goods, a change in demand is direct while for inferior goods the change is inverse. Other reasons that may cause changes in demand are the changes in the preferences and expectations of the customers or consumers. Supply is the other factor in shaping the prices and quantities of the market along with demand. It can also be represented through supply curve to know the relationship between price and quantity which in this case is directly proportional.

There can be either reduction in supply or increase in supply but this change is dependent on some factors like any change in the price of other goods will encourage the supplier to switch similarly the change in the prices of raw materials used in production will also affect the supply curve. Another factor is the technological advancement which, if adopted, will result in increased prices, or it can also result in a reduction of the production prices and increasing demand.

A record of the changes occurred in the market place due to deflation, or inflation is known as gross domestic product or simply GDP. The rise in the prices results in inflation, while the downward fall in prices results in deflation.

If the change is evaluated at the prices of some base year, it is called real GDP. Unemployment rate refers to that skilled labor force which is well capable of working but are not being utilized for doing any work and are still unemployed. It does not include those who are capable of working, but are not willing to work; such people are termed as discouraged workers. Frictional describes the concept of not finding and matching the new jobs with the qualified labor, which is willing to work and the reason is mostly due to insufficient information about the new and current job openings.

On the other hand structural unemployment occurs mostly due the changes in the economy, which results in downsizing in organizations and restricting the workers from the work available due to lack of knowledge or not up to date knowledge. The basic principle of the classical theory explains that the economy changes itself and is self-regulating. Money as defined is anything that is accepted in transaction from one person to another for the sale and purchase of goods.

Money can be used as:. The medium of exchange is vital as it helps in eradicating the barter system which involved the exchange of goods or services only which is termed as a double coincidence of wants. Medium of exchange made transactions easier and broadened the scope of trade around the world.

Money needs a store of value to hold its value over time and to remain the medium of exchange. If there is no store of value for money, then it will lose its importance as a medium of exchange.

Although it does not have the uniqueness as a store of value and people have other options, but its liquidity gives it and edge and preference over other stores of value as it is readily accepted and available and can be easily transported.

As a unit of account money provides valuable information and helps in decision making. It helps the supplier in deciding the rate of supply and the buyer to calculate the demand and the measuring their values in terms of price or money.

The uncertainty of the future, the inflation and the interest rates and not to forget the level of income are factors that greatly influences the demand for money. Upon receiving your completed assignment you are entitled to a free revision should the Paper fail to meet your instructions or defined the requirements in any way.

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