RethinkingGreatDepression_C1_C2

# RethinkingGreatDepression_C1_C2 - Rethinking the...

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Rethinking the Great Depression

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The Gold Standard \$20.67 = 1 oz. 1 oz. = £4.25  £10.29 mill. \$50 mill. \$4.86 = £1   What if American exporters can’t exchange all of the £10.29 million?  Suppose they can only exchange £8 mill. at the going rate. . . . receiving only \$38,880,000  They would cash the rest out in gold: £2.29 mill. = 538, 823 oz.  They would redeem in U.S. for dollars: 538, 823 oz. = \$11,120,000  Total value received = \$50,000,000
The Gold Standard \$20.67 = 1 oz. 1 oz. = £4.25  \$50 mill. £10.29 mill. \$4.86 = £1   The flow of gold from England to U.S. won’t persist over time.  gold =   MS  MS =   P inflation M•V=P•Y  gold =   MS  MS =   P deflation  U.S. exports fall, British exports rise; trade flows balanced.

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Confounding The Gold  Standard
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## This note was uploaded on 10/20/2010 for the course ECO 473 taught by Professor Foster during the Spring '07 term at N. Arizona.

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RethinkingGreatDepression_C1_C2 - Rethinking the...

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