Question

Under the gold standard, gold flows reduce the money supply in one nation when another nation experiences a trade surplus. The nation with a trade surplus has a swell in the money supply, which leads to price increases. At the same time, the nation with a reduction in the money supply will cause prices to fall. The lower prices create more demand for product from the nation with a reduction in the money supply, which leads to a Ofloating exchange rate. Otragedy of the commons. Obalance-of-trade. Ofacilitating payment. O planned economy.

          Under the gold standard, gold flows reduce the money supply in one nation when another nation experiences a trade surplus.
The nation with a trade surplus has a swell in the money supply, which leads to price increases. At the same time, the nation
with a reduction in the money supply will cause prices to fall. The lower prices create more demand for product from the nation
with a reduction in the money supply, which leads to a
Ofloating exchange rate.
Otragedy of the commons.
Obalance-of-trade.
Ofacilitating payment.
O planned economy.
        
Show more…
Under the gold standard, gold flows reduce the money supply in one nation when another nation experiences a trade surplus.
The nation with a trade surplus has a swell in the money supply, which leads to price increases. At the same time, the nation
with a reduction in the money supply will cause prices to fall. The lower prices create more demand for product from the nation
with a reduction in the money supply, which leads to a
Ofloating exchange rate.
Otragedy of the commons.
Obalance-of-trade.
Ofacilitating payment.
O planned economy.

Added by Keith R.

Close

Principles of Economics
Principles of Economics
Gregory Mankiw 8th Edition
AceChat toggle button
Close icon
Ace pointing down

Please give Ace some feedback

Your feedback will help us improve your experience

Thumb up icon Thumb down icon
Thanks for your feedback!
Profile picture
Under the gold standard, gold flows reduce the money supply in one nation when another nation experiences a trade surplus. The nation with a trade surplus has a swell in the money supply, which leads to price increases. At the same time, the nation with a reduction in the money supply will cause prices to fall. The lower prices create more demand for products from the nation with a reduction in the money supply, which leads to a floating exchange rate.
Close icon
Play audio
Feedback
Powered by NumerAI
Kathleen Carty Jennifer Stoner
David Collins verified

Crystal Wang and 67 other subject Microeconomics educators are ready to help you.

Ask a new question

*

Labs

-

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs

*

Key Concepts

-
Key Concept
Premium Feature
Explore the core concept behind this problem.
Play button
Key Concept
Premium Feature
Explore the core concept behind this problem.
Your browser does not support the video tag.

*

Recommended Videos

-
suppose-the-consumption-of-gold-offers-people-a-marginal-utility-that-diminishes-as-that-person-consumes-more-gold-assume-that-gold-can-be-mined-in-unlimited-amounts-at-a-constant-marginal-c-51639

Suppose the consumption of gold offers people a Marginal Utility that diminishes as that person consumes more gold. Assume that gold can be mined in unlimited amounts at a constant marginal cost c measured in terms of the units of the non-gold consumption good. Use the money market equilibrium where gold is used as money to find the value of gold when used as money or trading value of gold. Can the trading value of gold exceed c in equilibrium? Explain your answer. What will be the impact of gold consumption and mining due to the increased use of gold as money? Explain your answer. If c increases with the amount of mining, what will be the impact on gold consumption and mining of increased use of gold as money? In order to explain your answer, find the intrinsic value of gold and compare it with the trading value or monetary value of gold to show the impact of rising in c on the use of gold as money.

Crystal W.

in-the-modern-world-central-banks-are-free-to-increase-or-reduce-the-money-supply-as-they-see-fit-ho

In the modern world, central banks are free to increase or reduce the money supply as they see fit. However, some people harken back to the "good old days" of the gold standard. Under the gold standard, the money supply could expand only when the amount of available gold increased. a. Under the gold standard, if the velocity of money were stable when the economy was expanding, what would have had to happen to keep prices stable? b. Why would modern macroeconomists consider the gold standard a bad idea?

Macroeconomics

in-the-modern-world-central-banks-are-free-to-increase-or-reduce-the-money-supply-as-they-see-fit--3

In the modern world, central banks are free to increase or reduce the money supply as they see fit. However, some people harken back to the "good old days" of the gold standard. Under the gold standard, the money supply could expand only when the amount of available gold increased. a. Under the gold standard, if the velocity of money were stable when the economy was expanding, what would have had to happen to keep prices stable? b. Why would modern macroeconomists consider the gold standard a bad idea?

Economics


*

Recommended Textbooks

-
Principles of Economics

Principles of Economics

Gregory Mankiw 8th Edition
achievement 1,980 solutions
Principles of Microeconomics for AP® Courses

Principles of Microeconomics for AP® Courses

Steven A. Greenlaw, David Shapiro, Timothy Taylor 2nd Edition
achievement 1,928 solutions
Economics

Economics

Michael Parkin 12th Edition
achievement 1,657 solutions

*

Transcript

-
00:01 Suppose the consumption of gold offers people a marginal utility that diminishes as a person consumes more gold.
00:09 Gold can be mined in unlimited amounts at a constant marginal cost, c, measured in terms of units of non -gold consumption good.
00:17 Use money market equilibrium where gold is used as money to find the value of gold when it's used as money or trading value of gold.
00:37 So we're going to draw our graph with the value of money.
00:48 Against quantity of money per period.
00:58 Then we have the demand curve for money.
01:07 Then we have the supply.
01:09 So the supply is going to be perfectly inelastic.
01:17 It runs up and down.
01:30 So where the demand and supply curves cross, we end up getting the equilibrium value.
01:42 Can the trading value of gold exceed c physical gold costs more when it's used for trades...
Need help? Use Ace
Ace is your personal tutor. It breaks down any question with clear steps so you can learn.
Start Using Ace
Ace is your personal tutor for learning
Step-by-step explanations
Instant summaries
Summarize YouTube videos
Understand textbook images or PDFs
Study tools like quizzes and flashcards
Listen to your notes as a podcast
Continue solving this problem
Create a free account to:
  • View full step-by-step solution
  • Ask follow-up questions with Ace AI
  • Save progress and study later
Continue Free
Join the community

18,000,000+

Students on Numerade


Trusted by students at 8,000+ universities

Numerade

Get step-by-step video solution
from top educators

Continue with Clever
or



By creating an account, you agree to the Terms of Service and Privacy Policy
Already have an account? Log In

A free answer
just for you

Watch the video solution with this free unlock.

Numerade

Log in to watch this video
...and 100,000,000 more!


EMAIL

PASSWORD

OR
Continue with Clever