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Q. Explain why under the gold standard a perpetual surplus or a perpetual deficit is impossible.
Answer: Since specie inflows drive up domestic prices and restore symmetry in the balance of payments any excess eventually eliminates itself. A shortage of currency direct to low domestic prices and a foreign payments surplus, and any deficit eventually eliminates itself.
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Q. What can one learn from the following figure? Answer: The figure shows the U.S. current account as well as net foreign wealth from 1977 until 1996. It illustrate that a
Q. Using 4 different figures, plot the time paths showing the effects of a permanent increase in the United States money supply on: A. U.S. money supply. B.
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