Consider Two Countries, Mondrain and Davenport That Are on the Gold

question 162

Multiple Choice

Consider two countries, Mondrain and Davenport that are on the gold standard exchange
Rate system. The exchange rate implied by the gold standard is 5 divas (Davenport's
Currency) per mond (Mondrain's currency) . Suppose at this exchange rate, the quantity supplied of monds exceeds the quantity demanded. Which of the following is true?

• A) Spending flowing out of Mondrain exceeded spending flowing into Mondrain.
• B) Spending flowing into Mondrain exceeded spending flowing out of Mondrain.
• C) Mondrain's exports to Davenport exceeded its imports from Davenport.
• D) Residents of Davenport acquired more assets in Mondrain than residents of Mondrain purchased in Davenport.

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Definitions:

Fixed Inputs

Resources or factors of production that cannot be easily increased or decreased in the short term, such as buildings or machinery.

Marginal Product

The additional output resulting from a one unit increase in a particular input, holding other inputs constant.

Labor

The effort by workers to produce goods or provide services in exchange for payment.

Capital

Assets used in the production of goods and services, often categorized as physical (like machinery) or financial (like money at hand).