Consider a Country That Has a Gold Standard Exchange Rate

question 135

Multiple Choice

Consider a country that has a gold standard exchange rate system. Which of the following occurs if this country expands its money supply to eliminate a surplus in its balance of payments?

• A) Aggregate demand, the price level, and real GDP all decrease and eventually, net exports will rise in response to the lower price level.
• B) The price level increases and real GDP increases as producers respond to the higher price level but aggregate demand will fall.
• C) Aggregate demand, the price level, and real GDP all increase, and eventually, net exports will fall in response to the higher price level.
• D) The price level and real GDP increase, but aggregate demand will fall.

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Definitions:

Reverse Engineers

Individuals or companies that disassemble a product to understand its design, components, and functionality, often for the purpose of creating something similar or improving the original product.

Lead Users

Innovative product users who modify existing products according to their own ideas to suit their specific needs.

Market Testers

Individuals or groups involved in testing a product in specific markets before a full-scale launch, to gauge consumer response and demand.

Virtual Prototype

A digital simulation of a product, used for testing and visualization before physical manufacturing.