Answer to Question #270079 in Macroeconomics for Octavi

Question

Distinguish between active balances and passive balances and mention the main determinant of each. (6)

Answer 1

Active balance is a transaction balance which is used as a means of payment and is proportional to the income, its main determinant is the economic growth rate while passive balance is where the financial assets are not determined by the consumption expenditure, its main determinant is the demand for money