Consider an Island Where People Use Sand Dollars (Shells) as Currency

question 66

Essay

Consider an island where people use sand dollars (shells) as currency. For simplicity, assume that people consume only one good: fish. Currently, there are 400 sand dollars in circulation and there are 200 fish purchased each year. Based on this information, what is the price of fish?
Now, suppose that a change in climate leads to new sand dollars washing ashore, leaving a total
of 500 sand dollars. If there are still 200 fish purchased each year, what is the new price of fish? In order to prevent inflation, what would have to happen to the amount of fish purchased each year?

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Definitions:

Third-Party Beneficiary

An individual or entity that is not directly involved in a contract but stands to benefit from it as specified by the contracting parties.

Contract

A legally binding agreement between two or more parties that outlines obligations and rights with respect to each other.

Listed Party

An individual or entity that appears on a list due to certain criteria, often used regarding sanctions, where listed parties are restricted from certain transactions and relationships.

Enforceability

The ability of a legal document or agreement to be upheld or compelled by law in a court of justice.