Principles of Economics- Mankiw (5th) 628

Principles of Economics- Mankiw (5th) 628 - 648 PA R T T E...

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648 PART TEN MONEY AND PRICES IN THE LONG RUN wealth. Most farmers in the western part of the country were debtors. Their creditors were the bankers in the east. When the price level fell, it caused the real value of these debts to rise, which enriched the banks at the expense of the farmers. According to populist politicians of the time, the solution to the farmers’ problem was the free coinage of silver. During this period, the United States was operating with a gold standard. The quantity of gold determined the money supply and, thereby, the price level. The free-silver advocates wanted silver, as well as gold, to be used as money. If adopted, this proposal would have increased the money supply, pushed up the price level, and reduced the real burden of the farmers’ debts. The debate over silver was heated, and it was central to the politics of the 1890s. A common election slogan of the populists was “We Are Mortgaged. All But Our Votes.” One prominent advocate of free silver was William Jennings
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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