How did the gold standard contribute to the spreading of the Great Depression of the 1930s?
What will be an ideal response?
After World War I most of the major industrialized countries of the world successfully reconstructed the gold standard. The United States and France were running large current account surpluses (trade surpluses) which saw gold flowing into the vaults of these two countries. Instead of allowing their domestic money supplies to increase, fearing inflation, the monetary authorities in both countries tightened the money supply. The results were severe since it caused the authorities in countries experiencing current account deficits (trade deficits) and gold outflows to have to tighten their monetary policies even more. The quantity of money worldwide was decreasing and the price level had to decrease as well. The resulting deflation increased the likelihood that people would default on loans and tightened credit availability, destroying the economic and financial systems in many countries including the United States.
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Which of the following is not cited as a reason for a firm to pursue a group pricing strategy?
A) To minimize its total costs of production. B) To increase its total profit. C) To attract and lock in additional customers. D) To create network externalities.
Which of the following examples, ceteris paribus, will cause a rightward shift in the aggregate demand curve for the United States?
a. The nation’s general price level decreases. b. American consumers lose confidence in the economy. c. American consumers take on higher levels of debt. d. The nation’s population increases.