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If the summary of economic activity is such that total production is $100, total spending is $100 and total income is $100 and all of this financed with a $20 bill, what is the amount of the flow in this example?Multiple choice question.$100$20$80$120

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If the summary of economic activity is such that total production is 100,totalspendingis100, total spending is 100 and total income is 100andallofthisfinancedwitha100 and all of this financed with a 20 bill, what is the amount of the flow in this example?Multiple choice question.100100208080120

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Solution

The amount of the flow in this example is 100.Thisisbecausetheflowofmoneyinaneconomyisrepresentedbythetotalproduction,totalspending,andtotalincome.Inthiscase,allthreeareequalto100. This is because the flow of money in an economy is represented by the total production, total spending, and total income. In this case, all three are equal to 100. The fact that all of this is financed with a 20billdoesnotchangethetotalflowofmoney,itjustmeansthatthesame20 bill does not change the total flow of money, it just means that the same 20 bill is being used multiple times.

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